Chargebacks are an inevitable part of any business that accepts payments. For those unfamiliar, a chargeback is essentially a demand by a credit card provider for a retailer to reimburse the loss on a fraudulent or disputed transaction. In simpler terms, a customer files a dispute with their card provider, and the payment is reversed. Several legitimate reasons exist for a customer to dispute a charge, leading to a chargeback or refund.
Common examples include:
- The customer did not receive the purchased items.
- A duplicate transaction was processed.
- Errors in charges occurred due to technical issues.
- Fraudulent charges were made on compromised credit or debit cards.
Legitimate chargebacks are a cost of doing business, and companies have come to expect them. However, increasing rates of the type of illegitimate chargeback known as “friendly fraud” require greater scrutiny from businesses, including parking companies.
The rise of friendly fraud
Friendly fraud occurs when customers abuse the chargeback process to their advantage. According to Statista, eCommerce losses from online payment fraud were estimated to reach $48 billion globally in 2023. This sum isn’t surprising given the rise in eCommerce and increased prevalence of Card Not Present (CNP) transactions, especially since the COVID-19 pandemic. In the parking industry, most transactions are now CNP, as more customers use smartphones to pay. With the convenience of credit card apps, initiating a chargeback can be as easy as making the original purchase.
Friendly fraud puts an unnecessary burden on businesses. Many customers may not understand the consequences of their actions, or they may exploit the system intentionally. Either way, this creates additional work and financial strain on those in the business of parking and transportation, especially small to medium-sized organizations that may not have the resources to tackle chargebacks effectively.
Combating friendly fraud
In the parking industry, chargebacks — particularly from friendly fraud — are a costly issue. But don't lose hope; there are strategies you can use to boost your chances of winning disputes. One major advantage of mobile transactions is that smartphones provide a wealth of verifiable information that can be used as evidence when disputing chargebacks.
Here are key strategies to improve your success rate:
Comprehensive cover letter. A well-crafted cover letter can make a big difference when disputing chargebacks with a credit card provider. Include a clear summary of how a parking session works from beginning to end. For instance, when a customer arrives, they see a sign with a QR code. To proceed, they unlock their smartphone and scan the code, enter their mobile phone number, receive a verification code, and may provide their email for a receipt. This sequence of actions shows the customer's active participation, which is crucial evidence.
Attention to detail. Specific transaction details make all the difference. Include information such as how many times the customer has used your lot, the email provided, and the vehicle's make, model, and license plate. For valet services, present evidence such as car movement reports, photos taken at check-in, and records of previous visits. These details strengthen your case and show the legitimacy of the transaction.
Providing thorough documentation also demonstrates preparedness and diligence, making a compelling case to the credit card provider. The more detail you provide, the stronger your case.
Proactive measures for reducing chargebacks
To minimize chargebacks, it's essential to take proactive measures:
Clear communication. Make sure customers understand your terms and conditions, cancellation policies, and refund processes. Many chargebacks stem from misunderstandings. Transparent communication can prevent disputes from arising.
Customer Support. Provide excellent customer service and make it easy for customers to contact you if they have issues. Many chargebacks can be avoided if customers feel they can resolve their concerns directly with you.
Moving forward
Although the rise of friendly fraud is making chargebacks an increasing challenge, leveraging technology to gather and present solid evidence can improve your chances of successfully disputing illegitimate claims. Moving from passive acceptance of losses to actively combating fraudulent claims can significantly reduce unnecessary costs. As the industry continues to innovate, staying ahead of fraud will be critical. By adopting proactive measures and staying vigilant, we can keep the chargeback process fair and balanced for everyone.
Chargebacks, while challenging, are not insurmountable. With the right strategies and a proactive approach, businesses can defend against friendly fraud and reduce its occurrence. By using the tools at our disposal — like detailed transaction records, comprehensive cover letters, and robust customer service — we can mitigate the impact of chargebacks and ensure that our industry remains strong and resilient.
KATHERINE BEATY is executive vice president of customer experience for TEZ Technology. She can be reached at katherine@teztechnology.com.
