By Nick Cucci
Fluid Pay LLC
More people are going into business for themselves, and this is a wonderful thing. A diverse economy is a thriving economy, but it does open up new risks. As more people devise their own business models and enter key industries, more small business owners are grappling with the negative impacts of chargebacks.
This essential tool is now being used more often to perpetrate fraud, and this is upsetting businesses significantly. Receiving one chargeback might not be the end of the world, but chargebacks can escalate quickly and become a significant problem. Fortunately, you can help merchants push back against them, and I'm going to tell you how.
For those who are new to the industry, a chargeback is a practice created to protect people when they shop. Chargebacks are designed to give the buyer a chance to dispute charges and get their money back if they pay for something and never receive it or receive something that is clearly not what they ordered.
Although we are moving into an age with a diverse and thriving digital business economy, this wasn't always the case. Now, for every honorable business owner operating online, there are quite a few less favorable ones. So chargebacks are a beneficial tool when used as intended.
While the practice of chargebacks was founded upon good principles, it is an unfortunate truth that helpful systems can often be manipulated to be used for ill. In today's world, chargebacks are becoming more common—and not because more people are not receiving products or are receiving faulty ones.
Fraud is more common than anyone likes to think, and today's small business owners are under attack. More people are using chargebacks to commit fraud (see tinyurl.com/4crc7fcz), claiming they didn't receive what they paid for—or that the product was not what they agreed to purchase, even if they did receive exactly what they purchased.
In some cases, the issue raised might not even be about the product. When asked, 44 percent of U.S. consumers participating in a study said they consider chargebacks to be an appropriate way to politically pressure companies (see tinyurl.com/6m5u7ne8).
This type of fraud is impacting small business owners across a wide variety of platforms. Those who use payment processing systems, such as PayPal, can be at risk. However, chargeback scams are commonly being used in online marketplaces like Etsy, Amazon, Upwork and Fiverr, too.
When this happens, a business owner will often end up having a payment revoked, meaning they sold something, but they did not receive the payment for it, even though they delivered as described. As time passes, more scammers are using unscrupulous tactics to attempt to gain free products and services, forcing merchants to cope with the loss.
Great businesses are built upon loyal customers—but every business owner knows that not all customers are worth the purchases they make. When it comes to navigating fraudsters and problem customers, it is important for retailers to know what they can do to protect themselves, even if it is after the problem shows up.
Following are tips on what merchants can do to push back against fraudulent chargebacks and protect their businesses.
While types of documentation can vary, it is important that merchants maintain active records of all communications between themselves and their customers, a record of every purchase they make, and evidence of the deliverables they offer—whether that is a shipping confirmation on a bar of soap or a time-stamped digital download. This documentation is crucial when it comes to navigating the law.
Merchants suddenly faced with chargebacks will want to focus on collecting all of the essential documentation. Being able to show the inquiring financial institution evidence of every aspect of the interaction—and proof of the provided product or service—can go a long way in helping merchants ensure that they receive payments they are owed.
A rebuttal letter is a concise letter that demonstrates why the chargeback is fraudulent. They will want to explain the situation in its entirety and share documented evidence that what the person is claiming is inaccurate. This will allow them to show that the problem is the consumer, not them.
To ensure that things work in their favor, merchants must be attentive and maintain active communication with the financial parties involved. There may be questions to answer and more evidence to share, but they need to see it through to prove they deserve the money they are owed.
A business may need to take active steps to thwart potential fraudulent attacks so it can continue to maintain its rank or selling status on certain platforms. These platforms want partners that make them money, and that won't happen if people are continuously demanding refunds. Staying up to date on certain trends related to fraudulent behaviors can help merchants alter business practices to reduce the risks associated with these behaviors.
In a perfect world, a business would sell a quality product, and the customer would be satisfied. While this might be true for the majority of a merchant's sales, it might not be true for all of them. Knowing how to navigate dishonest customers with ill intent can help businesses stay ahead of fraud risks and navigate them more effectively, so help your merchants stay informed. 
Nicholas Cucci is the co-founder and COO of Fluid Pay LLC. Cucci is also a graduate of Benedictine University and a member of the Advisory Board and Anti-Fraud Technology Committee for the Association of Certified Fraud Examiners, as a CFE himself. Fluid Pay is the ONLY 100 percent cloud-based Level 1 PCI Payment Gateway processing transactions anywhere in the world. Contact Nick at Nick@FluidPay.com. Benefits of crypto for the underbanked
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