Electronic Retailer - April 2011 - 54

BY ART GARDNER

CHANNEL CROSSING: PAYMENT PROCESSING

Fight Credit Card Chargebacks and Fraud with Clarity, Vigilance
In mid-2009, the grumbling started: thousands of consumers complaining to local law enforcement, banks, the Card Associations, even the federal government that they were the victims of internet fraud. Cardholders reported that they were charged for goods they never ordered, found they were being billed hundreds of dollars for items that cost a fraction of that price at local stores, or that even after trying to cancel recurring services they were still being shipped and charged for unwanted items. On the other side of the transaction, Internet retailers were being crushed by chargebacks, the fees and fines associated with them and the threat of being blackballed in the industry. That’s when the Federal Trade Commission and Card Associations stepped in, announcing in late 2009 new Internet marketing guidelines. That was no panacea. The patchwork quilt of card brands, processors, banks, independent sales organizations and sales offices produced different – even conflicting – interpretations of these guidelines. That led to confusion and a general sense that no one – not even the U.S. government – knew precisely what was allowed when it came to selling on the internet. Now, a year later, the dust has settled, and it turns out that last year’s regulatory move seems to have produced one side benefit: cardholders are better protected, and so are merchants who have adopted the best practices in the direct response space. The best way is to convey the essence of your offer in a font size and color similar to headers used elsewhere in your layout. This should be placed “above the scroll” – somewhere on the site where it is seen easily without having to scroll down the webpage. Continuity offers that obscure ongoing costs will, in the long run, create confusion and produce higher chargebacks. Offer details are likewise important. That’s why smart e-tailers include a detailed Terms and Conditions page. Your page should include a clear explanation of the timeframes involved in any continuity offer and those timeframes should allow a reasonable period for cardholders to evaluate products and cancel recurring shipments. There should also be at least two ways to cancel recurring shipments, one of which should be net-based. For example, making it easier for a cardholder to request a cancellation via an online chat with a customer service agent, which not only reduces the likelihood of a chargeback, but also makes it easier to save the sale. Another crucial location for clear and conspicuous disclosure is where cardholders must indicate their agreement with the offer. The traditional “I agree with the Terms and Conditions” checkbox text could be expanded to include a simple summary of the actual offer terms. And instead of using a pre-checked box – now prohibited by the FTC – having the cardholder opt-in by clicking on that checkbox is a practice that gives merchants an additional way to fight fraud.

Clear and Conspicuous Disclosures
Ensuring your offer is clearly understood by consumers at every point in the transaction is the best way to reduce chargebacks. It also reduces potential confusion in the minds of cardholders which can lead to unintentional fraudulent activity. It begins by incorporating prominent pricing on your landing or ordering page. 54

Conducting Transactions
While clear disclosures reduce chargebacks and unintentional fraud, e-tailers must still take steps to prevent being victimized by unauthorized credit card activity. Two of the most powerful tools available to e-tailers are the Card Security Code (CSC)

electronicRETAILER | April 2011

Electronic Retailer - April 2011

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