The perils of chargebacks may be universal, but your individual experience with chargebacks can depend greatly on the other stakeholders involved in the process—the cardholder, your acquiring bank, the cardholder’s issuing bank, the card network, and even the platform powering your e-commerce store.
Merchants who use popular shopping cart solutions like Magento should always be aware of any unique aspects of the platform that might affect fraud rates, dispute activity, and transaction processing. If your e-commerce store is running on Magento, what do you need to know about dealing with fraud and chargebacks?
There are more than a quarter of a million e-commerce stores running Magento right now, processing up to $155 billion in transactions every year. Needless to say, with that much activity tied to the platform, a lot of chargebacks are Magento chargebacks.
This doesn’t mean that they’re any worse or better than other chargebacks—only that merchants who use Magento won’t be able to fully optimize their chargeback prevention strategy unless they account for all of the ways in which the platform might be impacting their fraud and chargeback activity.
No matter who your banks and merchant service providers are, it’s never a bad idea to investigate the ways in which the policies and operations of the third parties involved in your transaction process might be influencing customer disputes. Anything that mediates your interactions with your customers can affect their experience for good or ill and must be examined as a possible root cause of your chargebacks.
The chargeback process begins when a cardholder finds a transaction that they don’t think they should have to pay for, so they reach out to their bank to dispute it. If the bank thinks they have a valid dispute reason, they will return the cardholder’s money and take the funds back from the merchant. A Magento chargeback is simply any chargeback that follows a transaction made through a Magento-powered e-commerce site.
The card network, bank, and cardholder won’t have any reason to know or care that Magento was involved in the transaction, but this knowledge can be useful for merchants, especially in the case of true fraud and processing error chargebacks.
By the same token, providers of shopping cart software and e-commerce platforms can be indifferent to chargebacks, at least in the sense that they aren’t financially impacted by them the way banks and payment processors can be. Merchants, however, can never afford to ignore chargebacks, and here’s why:
Every merchant needs a chargeback prevention strategy, no matter what platform they’re using.
The easiest chargebacks to prevent are the ones filed by confused or dissatisfied customers. By addressing their issues promptly—or anticipating them ahead of time—you can minimize these chargebacks and avoid some of them entirely. These are some of the best practices we recommend:
Fraud is another story. User-friendly platforms like Magento are often attractive to new merchants, who may feel that they’re too small or unknown to become targets for fraud right away.
Fraudulent transactions can come in all shapes and sizes, but there are two distinct patterns to watch out for:
Vigilance and good habits will only get you so far when you’re dealing with technologically sophisticated fraudsters. To stop determined cybercriminals, you need appropriate and up-to-date anti-fraud software.
These days, the best anti-fraud tools use machine learning and artificial intelligence to look for subtle indicators of fraud, based on transaction data and user behavior. When they flag a transaction as potentially fraudulent, the merchant should be able to manually review it and decide whether to accept it or not.
Different merchants will have very divergent experiences with fraud, so it’s important to choose a solution that fits your size, industry, and the scale of your fraud problem.
A careful analysis of your transaction and chargeback data can provide useful insights for making the right choice. Magento merchants need to look for anti-fraud tools that they can integrate through Magento Connect. If you can find a matching plugin, you can install the software, enable the plugin, and configure the tool as needed.
Whether you’re cautiously venturing into the sea of e-commerce with an all-in-one e-commerce platform or rolling out a massive customized solution for a major brand, chargebacks will come for you, and you’ll need the right tools and strategy for your own unique situation.
Figuring out what makes certain tools or strategies “right” for your online store isn’t always easy, though, and it’s a high-stakes decision with costly consequences if you choose wrong. If you aren’t sure which providers to turn to, you can always consult an expert chargeback management firm that can assess the state of your business and your chargeback activity and provide you with the knowledge and data you need to make confident selections.
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