Reasons for Chargebacks and Their Remedies

Chargebacks can fall into any of five different reason categories:

1. Processing Errors
2. Customer Dispute
3. Post-Transaction (or non-fulfilment of copy requests)
4. Potential Fraud
5. Authorization-Related
In a CNP scenario (Card not Present), following reasons are most common: Processing Errors, Customer Dispute, and Potential Fraud.

Remedies

By all means online merchants are at a disadvantage when it comes to chargebacks. With no credit card to swipe or receipt to sign, one needs to be innovative to really verify a sale.

For ecommerce players like online gaming or online calling services , the situation is even worse, because the delivery of service is immediate and online.
There are new tools available, and more on the way, that aim to reduce online fraud and therefore reduce opportunities for chargebacks. Two similar technologies, Verified by Visa and SecureCode, provided by Visa and MasterCard respectively, will help to verify a customer's identity at the time of purchase.

Unfortunately, I am not sure what’s the base that these companies have, and then there is always a threat of loosing a customer, since it’s one extra step in the entire ecommerce process and not all customers would remember the secureCode/Verified by Visa code at all times.
So this will have a limited impact for now.

But while you use and adopt the Fraud Management technology, nothing beats a Customer Centric Environment.

I would advise the following :

Analyse the reasons why one has a high incidence of chargebacks.

1. If it is fraud:
a. then one needs to have fraud management system in place. (Connect with Visa, PayPal,
CCavenue or specific security/fraud management agencies and configure policies and
systems around address verification, negative database, verify IP, order velocity, etc.)

b. Share your negative database with your competition and make a Global Industry
Negative Database : Block these cards across the Industry.

2. if it is due to customer dissatisfaction: we need to work towards
a. Better and more frequent communication with customers

b. Put in place a system, that records step by step affirmatives and sign-ups by the
customer. This is proactively recording customer satisfaction and his receipt of service, so
that even in case of dispute the incidence is minimum, and to start with it will help you
have a satisfied customer with less chances of dispute.

c. Have a visible customer contact available at your site and all communications with
customer (including billing).

d. Run a customer loyalty program

At the end of it, as someone said, one needs to progress and become smarter along the way. There is no quick-fix and there is no permanent solution.


Sources http://www.cybersource.com, http://www.visa.com, http://www.sitepoint.com