Fighting Chargebacks with Delivery Confirmation

Table of Contents

1. What is delivery confirmation?
2. Why is delivery confirmation important for chargebacks?
3. What are the different types of delivery confirmation?
4. How does delivery confirmation fit into a chargeback defense strategy?
5. Delivery confirmation during COVID-19
6. Does delivery confirmation always prevent chargebacks?
7. Who is responsible when an order isn’t delivered?

For customers, few things are as frustrating as a package that never arrives. They’ve paid for it, waited for it, and it just doesn’t show up. No matter what the cause — the carrier took it to the wrong address, thieves swiped it, it got lost under a conveyor belt somewhere — the buyer is going to want someone to make things right.

Hopefully, that means contacting the merchant and asking for a replacement or a refund. In most cases, granting a refund is the correct decision for the merchant, even if the delivery failure isn't their fault. The customer will be satisfied and the issue will be resolved.

Unfortunately, this doesn't always happen. Sometimes the customer doesn't contact the merchant and instead goes directly to their bank to dispute the charge. This might happen because the customer doesn't know how to contact the merchant, the merchant's customer service isn't available when they attempt to contact them, they fear the merchant might have intentionally scammed them, or they believe (incorrectly) that a chargeback will get them their money back faster.

It's also all too common for a customer to falsely claim their package never arrived in order to get their money pack without returning their purchase. These illegitimate chargebacks are often referred to as friendly fraud, and merchants who aren't in the habit of investigating their chargebacks might be surprised by how common this truly is.

When merchants receive illegitimate chargebacks, regardless of the reason behind them, they should fight those chargebacks through representment. Failing to do so not only results in a loss of revenue, but also makes a merchant a more attractive target for bad actors looking to take advantage of the system.

For many illegitimate chargebacks, one of the most valuable pieces of evidence a merchant can have is delivery confirmation. Let's talk about why delivery confirmation matters, what types are available, and how it should fit into a merchant's overall chargeback strategy.

"Merchandise not received” is a chargeback reason common to all the major networks, and it sees a lot of use. It does serve an important purpose: There are plenty of fraudsters out there who will pose as legitimate merchants online, take money for orders, and never ship a single product. Unfortunately, it’s also an easy reason code to exploit for friendly fraud.

For some people, working out product issues with the merchant is too much of a hassle — they’d rather just call their bank and lie about never having received the product at all.

In the world of chargebacks and payments, having documentation is critical for success. Documentation helps you keep track of revenue and income, transactions, and so on. Documentation is also a critical part of many compliance standards, including PCI DSS regulations.

Likewise, having documentation of delivery confirmation can help you during representment by giving evidence that you fulfilled your end of the bargain. Even better, if you're enrolled in a system like Order Insight that sends additional information to banks when a customer disputes a charge, you can often avoid the chargeback process altogether. 

Delivery confirmation would seem to be rock-solid evidence against this sort of chargeback, but the term can mean many different things depending on the level of service you’re getting from your carrier. The confirmation methods themselves also vary in their effectiveness.

The most rudimentary forms of delivery confirmation show that the package was delivered, but not necessarily where or to whom.

Rerouting can occur, or the wrong person can pick up the package, but as far as the tracking information is concerned, the delivery has been completed.

Many carriers will offer additional information along with delivery confirmation, such as confirmation of the address the package was delivered to, a description of where it was left, such as in the mailbox or at the front door, or a photo of the package at its destination.

In terms of presenting compelling evidence against a chargeback, the most reliable form of delivery confirmation involves obtaining a signature from the recipient upon delivery. Signature confirmation can be an effective deterrent against friendly fraud, since it provides more substantive evidence that a package was delivered to the correct location. Signature confirmation can also help to reveal true fraud if the signature obtained does not match the customer's.

How does delivery confirmation fit into a chargeback defense strategy?

“Merchandise not received” is a difficult chargeback reason to disprove, and under the card networks’ chargeback rules, the merchant bears the burden proof.

Basic delivery confirmation would appear to be sufficient evidence that the merchant shipped and delivered the package, but determined fraudsters have ways to undermine it. They may make false claims in explanation of why the confirmation isn't legitimate and in some cases may interfere with the tracking process by requesting address changes or entering incorrect information.

The bank still has to make a subjective decision based on the evidence before them, and there’s no guarantee that they will find a delivery confirmation compelling.

That’s why the more information you can include with delivery confirmation, the better. Photos, signatures, and detailed tracking information will make a stronger case that the merchant made every effort to deliver the package to the correct address and recipient.

The flip side of this is that customers don’t always want stricter delivery procedures, and may specifically request to opt out of them. Many people simply aren’t home during the hours when they typically receive a package delivery, and don’t want to have to chase it down at a pickup location because they weren’t home to sign for it. Some merchants may not be able to require signatures if their customers prioritize convenience and have the option to shop elsewhere.

Merchants who sell digital goods shouldn’t feel left out of this conversation — you have delivery confirmation options too, although you have to get a little more creative about it. You can require customers to communicate with you to obtain an activation key, obtain a digital signature, or log and match the IP addresses of the purchaser and the end user, just to list a few ideas.

Delivery confirmation during COVID-19

The COVID-19 pandemic has led many carriers to suspend signature requirements so that delivery persons and package recipients don’t have to come into close proximity or handle the same devices.

Never ones to let a public health crisis get in the way of a scam, it’s a safe bet that fraudsters are taking advantage of this suspension of the normal procedures.

This may involve chargebacks resulting from increased package theft, or from friendly fraudsters deciding that, since nobody signed for their package, they might as well dispute the purchase and get it for free.

Merchants who have been using more secure shipping methods and had been somewhat insulated from these issues in the past may find themselves experiencing a higher rate of fulfillment-related customer service complaints and chargebacks. The best thing to do is to try to get out ahead of the problem by contacting your carrier about which alternative proof-of-delivery methods they offer.

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