It’s more important than ever to offer your customers the option of paying by credit or debit card. In a recent study by the Federal Reserve, 55% of consumers decided to pay with a credit or debit card, while only 19% used cash. With online business growing at a rapid pace, this trend will only continue. The question is how a high-risk business protects itself from those pesky chargebacks (when a customer disputes a transaction) as online payments continue to rise. 

What is a high-risk business?

Payment technology companies categorize businesses by the amount of risk they will be taking on when they process transactions. Your merchant services partner will consider your business low risk if your business brings in less than $20,000 per month, your average ticket size is less than $50, and you have a low chargeback ratio. Businesses that have been around for a short time, lack financial stability, or are in an industry that has a high likelihood of chargebacks and fraud will require a high-risk credit merchant account.

Chargeback protection for high-risk businesses.

There are several precautions that you can take to minimize the chargebacks associated with high-risk credit card processing.

Multi-Factor Authentication (MFA).

By utilizing MFA whenever available, you can ensure that the purchase is actually being made by the cardholder. This will help to prevent fraudulent purchases and eventual chargebacks by the client.

CVV validation.

Those three little numbers on the back of the card are there for a reason. Online scammers and other unpleasant people can get a credit card number off the dark web, but most scammers don’t have the CVV code from the back of the card.

Address Verification Service (AVS).

A newer way that high-risk businesses are using to verify the authenticity of the purchaser, AVS allows you to view the billing address entered by the purchaser. It then matches that address with the actual billing address of the cardholder. If there is a discrepancy, then the transaction will be declined. 

3-D Secure (3DS).

This is a customer authentication protocol originally created for ecommerce transactions. The 3 in 3-D stands for the three domains that work together to authenticate purchases. The three domains are:

• The acquirer domain or the merchant’s bank.
• The issuer domain or the bank that issued the card
• The interoperability domain, which is the infrastructure used to support the 3-D protocol

These work together to verify the transaction. If you have seen “Verified by Visa” or “Mastercard Identity Check,” that is what 3-D Secure is.

Fraud and chargeback reduction tools.

Some payment technology providers even offer proprietary fraud and chargeback reduction tools like Fraudcast. That way you can stay one step ahead of cybercriminals with customized reports and alerts delivered to your inbox every weekday. 

Other preventative measures.

Besides payment fraud detection, improving the relationship between you and your customers can go a long way in reducing the number of chargebacks you receive. Some best practices include providing 24/7 customer care to aid in any disputes with your customers. Training staff to provide the best service available and solving issues before they become problems works as well.

PCI compliance.

The major credit card brands have established security standards for the payment card industry known as PCI DSS. By being  PCI compliant, businesses agree to follow established procedures to secure and protect sensitive cardholder data from cybercriminals. 

Post-transaction prevention.

Post-transaction chargeback prevention is another tool to reduce the number of chargebacks you receive. Chargeback alerts allow the merchant to refund the purchase before a chargeback occurs. This is not ideal, and the chances of getting your merchandise back are slim to none.