Reducing Credit Card Chargebacks

Owned by Sarah Holst
Last updated: Nov 17, 2021
7 min read

Many of our resorts are reporting a significantly higher number of chargebacks from online purchases than have been seen previously. To help reduce this impact for our customers, the Aspenware team has been meeting with our payment gateway partners, talking with thought leaders, and looking at the research on how we can work together to minimize fraudulent chargebacks and successfully challenge chargeback disputes when they do happen.

The common reasons for chargebacks include:

  • Fraudulent use of stolen credit cards; and

  • Guests disputing charges because they disagree with a cancellation policy.

In this article, we will share what we have learned and what actions we are taking to help reduce the impact of these chargebacks on our customers.

Fraudulent use of stolen credit cards

The first scenario, and the one having the most impact on our resort customers, involves the fraudulent use of credit cards. What most resorts are experiencing is a scenario in which an instigator has obtained a list of fraudulent credit cards. Most often they have the Cardholder Name, Card Number, CVV number, and Zip/postal code. The instigator then posts tickets for sale on social media or Craigslist and unsuspecting skiers or sightseers decide to purchase them, likely because they are priced lower than the resort website price. The instigator takes money and information from the unsuspecting guest and purchases the required tickets on the resort’s website using the stolen credit card as payment. The order is placed under the name of the guest visiting, however, the credit card is in a different name. The skier will be sent the order confirmation so they can collect their tickets at the PUB, Skiosk, or ticket window at the resort. After the tickets are collected and used, the real cardholder notices the charge on their credit card and contacts their bank to dispute the charge. The bank sends a chargeback to the resort. Unfortunately, the resort likely can’t refute this chargeback because the card has typically been reported as compromised and the real cardholder did not make the purchase.

Following are some ways these fraudulent transactions can be prevented.

  1. Use full AVS verification.

    • It is common practice to require a Cardholder Name, CVV, and zip code for “card not present” transactions. If you are not already requiring CVV and zip code, we recommend that you contact your payment gateway support representative right away to ensure those requirements are in place. You also need to make sure that you have set up your payment gateway to decline the transaction if there is not a perfect match on these 3 data points. We recommend working with your payment gateway customer service representative to ensure that your gateway is set up based on your sensitivity tolerance. Unfortunately, the more data points you require and are validating, the higher the rate of declined transactions and, potentially, the lower your overall conversion rate. This can also be frustrating for your real guests who are innocently trying to make a purchase but enter data incorrectly.

    • An alternative to locking down everything in the payment gateway and risking a high failure rate is the implementation of Kount and or Square Risk Manager. These solutions are designed to identify fraud and maximize transaction success rates.

  2. Implement Kount.

    • Kount is a proven, 3rd party solution that works to identify fraudulent transactions before the credit card is authorized or flag transactions that are likely fraudulent so retroactive action can quickly be taken.

    • Kount uses information such as email, address, and device ID to derive additional data points to determine a fraud score. For example, if an email address was created a minute before the transaction is initiated, there is a high probability that it’s a fraudulent transaction.

    • One of the Aspenware customers currently using Kount has been able to identify 80% of their fraudulent credit card transactions as a result of Kount. Once a transaction is identified as fraudulent, the transaction can be returned to the credit card before the chargeback dispute occurs. With these numbers, the ROI for Kount is clear.

    • Today we offer integration with Kount if you use Braintree or Auth.Net as your payment gateway and will be supporting Kount with all other payment gateways by mid-December 2021.

    • We highly recommend Kount and will be hosting a joint webinar with Kount in January 2022 so you can learn more about their product and how it works seamlessly with Aspenware Commerce. Please contact Yolanda at y.foose@aspenware.com to learn more about implementing Kount and take a look at this ebook they have released.

 

3. Implement Square Risk Manager.

  • Square Risk Manager is a service that is available if you use Square as your payment gateway.

  • This service can be turned on at no extra charge to start identifying where your fraudulent charges are coming from and identify patterns.

  • Once you have determined some trends you can implement rules to block transactions based on the fraud patterns identified. This blocking service does have fees associated with it however, it will likely cost much less than the chargebacks you are experiencing. Please contact your Square representative to discuss or reach out to Yolanda to connect you with the right Square contact.

 

4. Include messaging in your shopping experience and email confirmation.

These instigators identify opportunities to exploit companies based on the products and services they provide and evaluate how easy it will be to get away with it. Because we have improved the guest experience and removed barriers such as standing in line at a ticket window to collect a ticket, lift tickets and sightseeing tickets have become an opportunity. Adding messaging to your shopping experience may deter these instigators from targeting your resort. Examples of messaging include:

  • Please make sure to bring the credit card used to make this purchase to the resort with you. To avoid fraudulent use of credit cards, we check that the card used to purchase products is in the possession of the guest using the products.

  • You may be asked to present the credit card used to purchase these products, prior to tickets being issued.

This messaging could be added to checkout either as a PDP product prompt or through a widget zone on the confirm step and should be clearly stated in your confirmation emails. Strong messaging could help to deter instigators from targeting your resort.

Charge disputes to avoid compliance with a cancellation policy

The second scenario is becoming more common as a result of the COVID-19 pandemic. In this scenario, a guest purchases a product and then decides that they are not going to partake in the activity anymore. Although cancellation policies, in general, are more forgiving, there are still situations in which a guest will purchase a product and be unable to cancel it because of the policy. Because they disagree with this policy, they call their bank to stop the payment. After talking to multiple payment companies' dispute experts, we offer some ways that you can be more successful in fighting these types of disputes.

  1. Provide clear messaging in the purchase experience. Make expectations around what is being sold, restrictions, and limitations as clear as possible throughout the guest purchasing experience (e.g., pre-sale, during sale, post-sale). Consider placing clear messaging on the PDP and in email confirmations.

  2. Require acknowledgment of the Terms of Service. Have customers acknowledge terms of service (refund/return/cancellation policies) on the website and document this proof in case of a chargeback. This can be added to non-refundable products as a product prompt that the guest must acknowledge prior to completing the transaction. It could also be added to a waiver with a tick box that draws the guest's attention to the policy. We recommend that you take screenshots or a screen recording of the guest purchase experience including the areas they need to acknowledge related to cancellation policies so you can provide this as evidence to the bank.

    • Make the messaging around this acknowledgment of Terms of Service very clear to the guest. Don’t hide it with lots of other information, if possible. The clearer it is, the better your chance of winning the dispute.

    • The acknowledgment of Terms of Service should include what to expect for the service, the conditions for the service, and any limitations around terms of services (e.g., refund windows, etc.)

  3. Make cancellation/refund policies highly visible during checkout. Use the "CheckoutPaymentMethodTop" or "CheckoutPaymentInfoBottom” widget zones in the ePayment page to call attention to your cancellation policy.

  4. Include refund/cancellation policies on email confirmations. (See example below.)

    • Add your phone number, address, website, and social media pages to your email confirmations. This will help a customer reach out to you directly if something goes wrong with a sale, rather than immediately filing a dispute with their bank.

    • Write a clear description of the goods or services sold for every online order. This can help jog a customer’s memory and prevent a dispute from happening.


5. Get Proof of Service. When possible, if the product is consumed, make sure you have proof. If the lift ticket was scanned, you should be able to produce the scan report. If a lesson was taken, show the report card or copy of an instructor's class card. If a rental was purchased, provide a copy of the rental form or the barcode of the skis the guest rented.

6. Know your customer. When a guest does have to visit your guest services desk, ask to view the credit card that was used to purchase online, and, when possible, make sure it matches the card used for the transaction.

7. Make sure your business name is recognizable on credit card statements.

Conclusion

Fraud prevention is a constantly evolving topic that Aspenware will continue to research and study. We will share our findings with our customers and implement the appropriate and reasonable fraud prevention functionality as it becomes available. In addition to the work we have already done with our payment gateways to reduce fraud and chargebacks, we will be providing Kount Integration that will be available in mid-December for all payment gateways. Kount is a proven solution that can significantly help you reduce fraudulent transactions at your resort. We will continue to work with our payment partners to add functionality that limits risk, including assessing the new 3DS secure protocols that are already utilized in Europe.

If you have any questions, comments, or want to learn more about Kount, please reach out to Yolanda at y.foose@aspenware.com.