When it’s cold outside, you wrap up in blankets and layers, and when it’s raining, you cover yourself with a raincoat and an umbrella. When you venture out, you can significantly lessen the harsh weather, though not entirely. Dealing with chargebacks at your hotel can be done using a similar strategy. The inconsistent use of technology and procedures.
makes chargebacks a constant problem for hotels. Chargeback fees can range from $20 to $100, so there is a real cost associated with them. In 2019, merchants lost 4.4% of revenue as a result of chargebacks. Due to the negative effects on the bottom line, the reputation of the brand, and the loss of crucial teamwork time, it is a burden on hotels. If you don’t make efforts to fix the vulnerabilities, it will cost $2.94 for every dollar of fraud loss, which can mount up very rapidly. And that doesn’t even take into account the time you spent resolving the conflict!
In this blog, we will learn what are chargebacks, and how hotels can reduce hotel chargebacks by using effective technology including a hotel management system.
What’s a chargeback and how is it different from a refund?
When a customer disputes a credit card transaction with their bank rather than the merchant and requests a reverse of the transaction, this is known as a chargeback. In this case, both the product or service and the amount paid are retained by the customer. Chargebacks may be related to any of the following:
- merchant errors,
- customer complaints,
- and fraudulent activities such as chargeback fraud and friendly fraud.
What sets this apart from a refund?
When a customer requests a refund, they go directly to the business where they made the purchase and ask for the transaction to be reversed. Although the person receives their money back, they are still required to return the goods or services they purchased.
Because these terms can occasionally be used interchangeably, it is important to distinguish between the two. This presents a simple opportunity for fraudsters to profit from, though the results for the customer are different.
Why is winning a chargeback dispute so difficult for hotels?
It’s challenging for businesses to come out on top in a chargeback case regardless of the industry they’re in. However, it’s not you. Two laws make it difficult-. . The laws were created to safeguard consumers against fraudulent activities like using stolen credit cards to make unauthorized purchases. What was once meant to protect customers is now a danger to hotels. Fraudsters see this as a gap. The fact that each credit card company handles chargebacks differently is another factor contributing to the difficulty of winning chargebacks.
On the customer’s end, there is also a lack of knowledge regarding the proper timing for filing chargebacks. Chargebacks should only be filed in the most extreme situations, but the customer’s perspective can vary on this. It is necessary to hold both hotels and guests accountable during the chargeback process. In addition to implementing technology and procedures that lessen the likelihood of chargebacks and fraudulent activities, hotels need to make sure that they are providing a consistent guest experience across the board. Chargebacks should only be requested by customers as a very last resort.
Although chargebacks can’t be avoided entirely, you can lessen their frequency so that you and the hotel teams can spend more time attending to other duties. As a result, hotel owners and managers have an incentive to take every precaution to prevent chargebacks. There are steps you can take to mitigate them even though you can’t completely eliminate them.
Seven guiding principles to help you manage and prevent chargebacks.
1) Use a clear payment descriptor.
Your guest should be able to identify the purchase they made as soon as they review their credit card statement. Don’t use code or shorthand that only makes sense to you. Rather than coding something as “P BB,” for instance, make the charge appear as “Paradise Bed & Breakfast.” As a result, there will be less chance of a customer disputing a charge because they didn’t recognize it and thought their credit card had been stolen and used fraudulently. The majority of chargebacks handled by Verifi, according to Rick Lynch, Senior Vice President of Business Development, start with an unclear payment descriptor. Your can help you do that.
2) Respond to a chargeback quickly:
A chargeback usually offers a 39-day response period for merchants and from the moment the dispute is filed, time begins to run out. Your counterclaim must be submitted through the appropriate channels along with any supporting evidence that demonstrates your position to be correct. You ought to be informed of who to get in touch with in order to contest a chargeback when you receive notification of one. Call your credit card processor for assistance if that information isn’t there.
3) Keep clear documentation to respond to chargebacks
With the help of you , keep all sales receipts, correspondence with the guest, and other supporting documentation, such as the signed registration card and folio, to show that they were authorized by the guest and that they actually stayed at your property.
Make sure you include documentation in your chargeback rebuttal to the card-issuing bank if the chargeback relates to your non-refund or cancellation policy. This will show that the guest was informed of the policy in full at the time of booking and in their email confirmation of their hotel reservation.
4) Keep payment and refund policies easily accessible
Your best course of action is to demonstrate that not only were the guests given all necessary information but that they also agreed to it, in the event that a customer claims ignorance on the subject of your refund policy or anything else for which they may have been charged. That means your terms and conditions should be written in such a way as to be clear and unambiguous and placed on the online page where customers check out.
5) Imprint your guest’s credit card details.
Lacking an electronic reader, some hotel owners photocopy the payment information from their guests in an effort to be prepared for bogus chargebacks. In doing so, they can produce evidence that the card was used during the transaction. But you can’t dispute something with just a photocopy. To take a picture of the card, you must use an imprint device. If a legible imprint is found or the card was electronically read, a chargeback is deemed invalid by Visa. Imprint machines are affordable, usually costing between $15 and $40, and would pay for themselves if they even helped to stop one or two chargebacks. Once again, can you help you with this herculean task.
6) Follow the PCI and processor standards strictly
A manual on how to manage payments at your business will typically be given to you when you sign up with a payment processor. Take note of this information. And, carefully review it to make sure you’re getting all the necessary data from your visitors because your bank will check to see if you did when looking into chargebacks. For instance, you might occasionally be required to record the IP addresses of customers who make online hotel reservations. Ensure that every employee who handles payments is familiar with the pertinent guidelines.
7) Use card processors with fraud detection services.
The best way to avoid chargebacks is to stop unauthorized purchases at your establishment. Look for a credit card processor that can offer specialized services that can block or stop fraudulent transactions when making your selection. Some service providers are able to assess the risk of a transaction even before it is completed. Then, as the business owner, you can assess any transactions that are thought to be risky and take additional security measures, such as getting in touch with the customer to get more details.
Bottom line, here’s what to keep in mind.
Chargebacks can’t be defeated, and they won’t go away. You do, however, have the ability to combat chargebacks and fraudulent activity. By putting policies, training, and technology in place, you can achieve this. There isn’t a single product, feature, or technique that can stop chargebacks and fraud. Chargebacks cannot be avoided, just as it is impossible to avoid the cold when you are outside. You can keep fraudsters at bay if you concentrate on lowering your exposure to them.