Chargeback disputes can be a nightmare for businesses, especially those in high-risk industries like iGaming and adult entertainment. These are detrimental to businesses in every possible way – leading to loss of revenue, damage to reputation, and potential fees from banks and payment processors. In this article, we’ll explore how high-risk businesses such as iGaming and the adult entertainment verticals can win chargeback disputes and protect their bottom line.
According to industry data, the iGaming and adult entertainment industries have some of the highest chargeback rates, with chargebacks accounting for up to 10% of all transactions. This is attributed to a variety of factors, including fraud, identity theft, and customer dissatisfaction.
But there is no one-size-fits-all solution for all kinds of chargeback disputes. According to experts at TickleCharge, real solutions vary because they are based on the type of fraud that is responsible for the dispute.
Visa defines a ‘high-brand risk merchant’ as a merchant outlet accepting or sending card-absent (and in some cases specifically cross-border) payments, required to be classified with one of the following Merchant Category Codes (MCC):
High-risk merchants, such as adult and online gaming businesses, need to factor in the risk of chargebacks in their business models and choose a payment partner who specializes in dealing with high-risk businesses.
Visa and Mastercard have both introduced new chargeback guidelines that allow merchants to dispute chargebacks before they become final. These include representment, which enables merchants to provide evidence and documents to support their case. Merchants can also take advantage of chargeback alerts, which notify them when a customer disputes a charge, giving them an opportunity to resolve the issue before it escalates.
Here’s a quick synopsis of these guidelines:
Chargeback disputes can harm businesses, but with effective strategies in place, businesses can prevent and win disputes.
Real high-risk industry merchants who have successfully managed chargeback disputes include online gaming companies like Playtech and the adult industry company, Adam & Eve. These companies have implemented chargeback prevention strategies that have enabled them to win disputes and protect their business profits and reputation.
Providing excellent customer service, evidence collection, disputing chargebacks, and working with payment solutions are essential steps backed by published research in the payments and chargeback industries. High-risk merchants need to factor in the risk of chargebacks in their business models and choose payment solutions that specialize in dealing with high-risk businesses. By taking these steps, businesses can protect their revenue and reputation.
A chargeback is a dispute initiated by a customer with their bank or card issuer to reverse a transaction. The bank or card issuer investigates the dispute and may issue a provisional credit to the customer while the investigation is ongoing.
High-risk merchants, such as those in the adult entertainment, sexual wellness, and online gaming industries, are more susceptible to chargebacks due to higher rates of fraud and disputes.
Chargeback representment is a process in which merchants can dispute a chargeback by providing additional evidence to their payment processor to support their case.
Merchants can mitigate chargebacks by improving customer service, using fraud prevention tools, monitoring chargeback ratios, and keeping accurate records.
The new Visa and Mastercard chargeback guidelines include pre-arbitration, reason code clarity, and collaboration between payment processors and merchants to improve dispute management and reduce the number of chargebacks.