Online Dating Chargebacks: Everything You Need to Know
February 19, 2020 | High Risk Merchant Account | Guest Post
by Don Bush, VP of Partner Engagement, Chargebacks911
Finding love online is big business. According to recent data published by IbisWorld, the online dating market in the US enjoyed 11.5% annual growth from 2014 to 2019, and now generates $3 billion a year in total revenue.
It’s a great time to be involved in this space. There’s still tremendous opportunity ahead; new players are catering to ever-more-specialized niches and segments of the population, all attempting to gain a foothold in this growth industry. Of course, opportunity comes with new challenges as well. Chargebacks, for instance, are a fast-growing problem in the dating space.
3 Fundamental Chargeback Sources
Chargebacks are forced payment reversals used by cardholders, and the banks that represent them, as a form of consumer protection. These disputes give consumers some resource to protect themselves if they fall victim to fraud or abuse.
Chargebacks sound like a simple concept at first glance. Digging deeper, though, we find a very complex issue that causes headaches for merchants in a variety of verticals. For instance, there are dozens of potential chargeback triggers that could occur at different stages in a transaction. The chargeback reason codes connected to each dispute case are an attempt to explain what caused the problem…but most of these codes are fundamentally unreliable.
We can trace all chargebacks to one of three potential causes:
- Merchant Error: Seemingly-minor policy and procedure oversights.
- Criminal Fraud: Bad actors seeking to deliberately steal from you.
- Friendly Fraud: Buyers who appear legitimate, but later file unjustified chargebacks.
Regardless of what triggered the chargeback, you’re still liable to lose revenue. You’ll also pay costly fees for each dispute, and suffer higher overhead costs.
Your chargeback ratio—your measure of chargebacks as a share of overall transactions each month—is a key indicator that demands careful, attentive management. If the situation gets out of control, and your chargeback ratio rises above the acceptable chargeback threshold, you may lose the ability to process card transactions entirely.
Why is Online Dating a “High-Risk” Vertical
Online dating is considered a “high risk” vertical. This means businesses who use a merchant category code (MCC) connected to this vertical tend to see higher-than-average chargeback rates. That begs the question: why do people file so many chargebacks with dating services?
Let’s revisit the idea of friendly fraud again. This is a fast-growing threat across nearly every vertical in the digital market; recent data suggests friendly fraud will cost businesses $50 billion this year alone. Each product category has unique triggers, but the underlying problem remains the same.
With dating sites, for instance, a customer might pay for your service, quickly find a match, then file a chargeback to recover the money spent. Buyers who engage in this behavior are effectively cyber-shoplifters; they’re abusing the system to get something for free. They may be able to rationalize these actions to themselves, but it’s not fair nor ethical to deliberately rip off merchants in this manner.
Of course, not every chargeback is such a clear-cut case of abuse. For example, some might sign up for service, then decide your platform isn’t what they’re looking for, and experience buyer’s remorse. Others might sign up for a free trial, then forget to cancel before being charged for service. The buyers are still not entitled to chargebacks in either of these scenarios, but there’s more nuance to the situation than outright fraud.
At Chargebacks911®, we describe disputes as existing on a spectrum: merchant fraud exists on one extreme, with cyber shoplifting on the other. The vast majority of chargebacks fall somewhere in the middle. In these cases, you can address the situation through changes to your policies and procedures, and through taking action to fight back against chargeback abuse.
Taking Steps to Prevent Dating Site Chargebacks
So, where should you start with chargeback mitigation? Below are some of the easiest and most-effective steps to see a quick reduction in chargebacks across the board:
Make it Easy to Cancel: You don’t want to lose customers…but a cancellation is better than a chargeback any day. That’s why it’s best to make your policies and procedures fair, straightforward, and easy-to-locate from any point on your site or app. You want to streamline the cancellation process, and provide customers with clear confirmation that they won’t be billed in the future.
Identifiable Billing Descriptors: Your billing descriptor should clearly identify you on the customers’ bank statements. If customers can’t recognize your charge based on the descriptor, they may suspect fraud and request a chargeback. That’s why your descriptor should clearly identify your brand by name, and URL, along with any other relevant descriptive information.
Stellar Service: Attentive, round-the-clock service can be one of the best methods of both preventing chargebacks and retaining subscribers. You should offer live service across multiple channels, including phone, email, and social media. This will reinforce your customers’ confidence, and build a positive image for your brand.
Watch for Bad Actors: Be aware of the signs of potential fraud. For instance, changing account details like location, age, or photos right after making a new account is suspicious activity. Also, given that criminals tend to send a lot more messages to try making fast connections with users, be on the lookout for users who send a high velocity of messages with spammy content. Weeding out abuse will prevent fraud and provide your customers with a much better overall experience.
Of course, there are times at which it’s impossible to prevent a chargeback. It’s best to have expert support in your corner for when these situations arise.
PayKings are official partners of Chargebacks911®. Our strategic collaboration with PayKings enables us to offer world-class chargeback mitigation strategies and services to their clients. Our approach offers a dynamic understanding to chargeback management, identifying chargebacks by their sources, then deploying the necessary tools and strategies to eliminate disputes.
February 19, 2020 | High Risk Merchant Account | Guest Post