CBD businesses across the globe face chargebacks frequently when compared to most other industries. This is because of regulatory complexities, product misconceptions, and sometimes even because of payment processors policies. Chargebacks are the biggest threat to the stability of any CBD merchant. In this guide we are going to reveal how you can proactively protect your CBD merchant account from expensive chargebacks.
Why CBD Merchants Are Chargeback Magnets
Before we discuss how you can keep the chargebacks under control on your CBD merchant account, it is important for you to understand why CBD merchants are considered chargeback magnets.
Unrealistic customer expectations: CBD is not a health improvement product. It does not have any significant effect on the human body as per any credible research; still, many buyers think that this will give them a miracle result, and once they don’t get this result, they feel disappointed and raise a dispute.
Subscription confusion: Many CBD websites sell their products on a subscription basis, which includes auto-renewal that can often trigger friendly fraud.
Shipping delays or seizures: If customers do not receive the product on time, they dispute the transaction and ask for money back.
Confusing marketing claims: Health claims on merchant websites can definitely invite dispute.
The Devastating Impact of High Chargebacks
If a CBD merchant starts getting excessive chargebacks, then this can result in significant devastation of the company; the account can be suspended or terminated. The rolling reserve can increase, and the processor may ask the merchant to accept a higher processing fee. This can also damage the relationship with the processor.
For all industries, including CBD, most payment processors enforce a strict chargeback threshold, which is often below 1%. Exceeding the limit can lead to account shutdown.
10 Proven Chargeback Prevention Strategies
These are ten proven chargeback prevention strategies that every CBD merchant must implement.
1. Set Accurate Customer Expectations
It is important for merchants to understand that making any medical claim is not going to help them when it comes to generating sales. Eventually these claims will backfire and result in chargebacks. For this, CBD merchants must use clear disclaimers and refund policies.
2. Implement Bulletproof Subscription Management
If you offer subscription-based product delivery to your customers, then you must have proper subscription management in place. You should use opt-ins for recurring billing, and along with that, make sure you send pre-renewal reminders to customers to avoid any surprises.
3. Provide Fast & Transparent Customer Support
Customer support is the key to converting disputes into conversations. Make sure your customer service team is quick in responding to questions raised by customers; this can significantly help reduce the dispute percentage. You should offer easy refunds whenever it is appropriate.
4. Use Recognizable Billing Descriptors
When you apply for a merchant account, make sure you use a recognizable billing descriptor on the application form. You should avoid generic or confusing billing names on the customer’s credit card statement.
5. Deploy Robust Fraud Filters
Your CBD payment gateway must use advanced fraud detection tools such as velocity checks, IP filters, address verification systems, and CVV checks.
6. Publish Updated COA Certificates Publicly
Let your customers verify the product before purchasing it. Upload all the COA certificates publicly on your website. This will build your customer trust and also keep chargebacks under control.
7. Enforce Strict Shipping Policies
Make sure that you follow strict shipping policies. Your team must adhere to the shipping timeline, and you should provide the tracking information as soon as possible to the customer.
8. Document Every Transaction
Whenever any chargeback occurs, you get the opportunity to fight it, but for you to win the case, you must have proper documents. Make sure you keep thorough records that include the order confirmation, delivery receipt, and customer communication emails.
9. Offer Multiple Contact Channels
Your customer should get multiple contact channels. Preferably, you should have phone, email, and chat support so that your customers can reach you whenever they require.
10. Train Your Customer Support Team
Invest time and money in your customer support team; educate them on dispute resolution best practices. They are your first line of defense because whenever customers are upset about the product or shipping, they call customer service, and if your customer service can handle the situation well, then these disputes can be easily solved.
How to Fight and Win Chargebacks
Whenever a chargeback hits your account, you should get into beast mode. Remember, these days merchants don’t get a lot of time to respond to the queries raised by the merchant processors in respect to chargebacks.
1. Act Quickly
You should submit the complete representment package before the deadline to your payment processor. When you respond quickly, then you increase your chances of winning the case.
2. Provide Rock-Solid Documentation
Remember, whenever a chargeback hits the accounts, both the merchant and the customer get the opportunity to prove their case. As a merchant, you should ensure that you provide solid documentation to the payment processor. This includes sending them the sales receipt, shipping and delivery confirmation, refund policy acknowledgement, COAs, email correspondence with the customer, or any other information that may confirm that the customer has received the product in the right time in the right condition.
3. Use Chargeback Alerts & Prevention Tools
Your merchant account is extremely important for your business. We strongly recommend you enroll for chargeback alert services so that you can preempt disputes.
4. Work Closely With Your Processor
Establish a communicative relationship with your payment processor. Be in touch with the sales representative that has offered the merchant account to you. Lean on your processor’s chargeback management expertise. Whenever possible, get through active coaching on high-chargeback triggers.
QuadraPay: Your Chargeback Defense Partner
When you work with QuadraPay, you can rest assured that you will be working with a payment processor that takes compliance seriously. Our payment processing partners allow merchants to access top-tier alert networks like Ethoca and Verifi. They also perform ongoing compliance audits. All this helps merchants stay safe and stable.
Protect Your CBD Merchant Account Today: Schedule a Free Chargeback Prevention Audit and bulletproof your payment processing stability.
Protect Your CBD Merchant Account Today
Schedule a Free Chargeback Prevention Audit and bulletproof your payment processing stability.
Frequently Asked Questions (FAQ)
Q1: What is a typical acceptable chargeback ratio for CBD merchants?
In general, it should be below 1%; however, many processors prefer the ratio to be under 0.75%. For high-risk categories, this may appear difficult, but if you manage your account properly, it is definitely achievable.
Q2: Are chargebacks more common in CBD subscription models?
Yes, merchants that offer subscriptions to the customers can potentially attract a high number of chargebacks. This is because subscriptions sometimes cause confusion. It is one of the leading chargeback triggers in the CBD industry.
Q3: Can I recover lost revenue from chargebacks?
The only way you can recover the lost revenue from chargebacks is by presenting your case wisely. Make sure you send strong evidence to the payment processor whenever chargebacks occur. This way, many chargebacks can be successfully reversed.
Q4: Do chargeback prevention tools really work?
Absolutely, these tools are great options for you; they offer near real-time alerts, which can dramatically reduce the chargeback occurrence.
Q5: Will chargebacks affect my ability to get a CBD merchant account?
Yes, that is true. If your account gets a lot of chargebacks, then other providers might not be interested in approving it. Remember, prevention is critical in this case.