What is the “chargeback” problem in e-commerce?

Chargeback is the cancellation of payments made by the user with a debit/ credit card, which is debited directly from the e-commerce seller’s account. Chargebacks allow consumers to get their money back and protect them from online fraudulent sellers.

Charges occur when customers contact their credit card issuers to dispute a transaction. If an issuer makes a valid dispute, the online merchant is required to pay the outstanding balance for the transaction and a processor chargeback fee.

Chargebacks result in a loss to retailers. For this reason, it is necessary to reduce the chargeback. However, it is not just about chargebacks and the monetary consequences that come with it. Many chargebacks can affect retailers’ ability to work with credit card processors, which will affect payment options for customers.

Online merchants may face a chargeback for several reasons, initiated by the merchant, bank or cardholder. One of the most common examples of chargebacks is where a customer is said to have made a purchase, but is actually a criminal who records information about someone else’s payment. When this happens, banks initiate a chargeback to retailers after receiving documents from cardholders, indicating that the specific transactions were fraudulent. In addition to canceling fake payments, online merchants are charged additional fees by their own processing banks.

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