The 1% Difference: Taking Steps Towards Reducing Chargebacks

Its easy to feel relaxed knowing 99% of your customers are happy. You win some you lose some, right? So 1 out of 100 customer’s have a complaint or cant remember what he did yesterday and charges back the transaction. Thats ok, right? Not anymore. On October 1, 2003 under Visas new chargeback regulations, that one out of a hundred now has the potential to put you out of business.

On July 1, 2003 Visa presented an impending set of guidelines requiring Sponsored Merchants and IPSPs to tighten chargeback levels, dropping the acceptable rate from 2.5% to 1% for domestic transactions. Acceptable rates for foreign traffic have dropped one-half percent from 2.5% to 2.0%. What does this mean for webmasters? How can webmasters whom are currently over the 1% level bring their ratio down before October 1st? How can webmasters whom are currently within the acceptable limit take measures to prevent it from happening to them? 

The 1% difference is all that separates success from failure for your online business. By taking steps towards reducing chargebacks and by making sure you are giving your customers a satisfactory experience, you can secure your position for long term success.

What You Can Control

Customer Solutions
In previous articles over the years I have often reiterated that the most important part of building a successful adult website is by making the customer feel confident, respected, and in control when they visit your site. By relaying a message of security and discretion, as well as excitement and satisfaction, visitors become members who stay for very long periods of time. If they do choose to cancel, they can be confident that support links will be easy to find, allowing the site owner to once again, take care of his or her customers needs.

In every business transaction, online or off, there are elements of trust and satisfaction at the point of sale. The customer must trust that they are receiving a fair price for their purchase, buying what they came to get, and will be satisfied with their purchase or get their money back. By making sure you are offering a quality product or service as advertised you can be sure to satisfy your customers to the fullest extent possible.

High Risk Merchant Solutions

There are some processors and merchant service providers who will cater to the adult webmaster industry. They will have tools available to help you deal with higher chargebacks including chargeback monitoring and chargeback reduction plans. You'll also be able to receive alerts for incoming chargebacks that will give you an opportunity to refund a custommer before the chargeback becomes officional. Some of the more popular high risk credit card processors include: MerchantAccount.CC, MerchantAccount.biz, MOTO Merchants, and creditcardprocessors.net.


Advertising Solutions
Traditionally, you can control how your products and services are advertised. However, as a pay site owner, you can put up front-ends and instantly setup a reseller program to gather an army of webmasters whom promote for you – leaving you to keeping your site updated other webmastery. But with every opportunity comes a liability. The more affiliates you gain, the more control you lose over how your site, free content you offer, and business in general is represented. 

There is a reason why MasterCard does not want their logo displayed on adult sites or other non-approved places. They wish to retain control over how their name and their trademark is represented – you can’t just slap one anywhere. So why do you let your affiliates control look and feel of your brand and the quality of your traffic?

One way to keep tabs on how your site is promoted is to search your domain name minus any extension (.com,.net,.cc) plus an illegal-content keyword in Google. If any affiliate is marketing your site, or any other site, content, or link on their domain they will show up in the rankings. You actually could use WebPosition Gold to search for all your affiliate’s domain names plus a few illegal keywords (like “Lolita” or “pedo” and more) and get a full report on who is ranking for what and what page to target any site that you do not wish to be represented on.

Software Solutions
There are several steps webmasters with referral programs can take towards better managing the quality of traffic they allow to hit their join forms. Geotargeting software is one helpful solution, and for webmasters who wish to filter their traffic independently of any sponsor program, GeoRedirect is a formidable solution to consider. By filtering all incoming traffic by IP, language, country, etc you can limit what traffic you will allow through to your join form or what traffic you wish to send to a sponsor program or relative payment option according to region where credit card fraud is likely high or if chargeback resolution is difficult. For example, if your merchant service only provides credit card processing forms and customer support in certain languages, perhaps you may want to filter off the traffic from other countries to who ever you select, using the GeoRedirect program. This enables webmasters some leverage in knowing what countries you do credit card business with and which you refer to a different payment option or sponsor program.

Compliance
What else can you control? Well you know you’re going to need your 2257 compliance up and up to date, so start there. Read up on your credit card processing firm’s current Acceptable Use Policies and Contract Terms and dot your “i’s” and cross your “t’s” that you are in compliance with their expectations. Is there a way to track your day-to-day or month-to-month chargeback ratios? Find out so that you have a way to know when you approach a danger zone. 

Communication
Let them know exactly when the next update will be, how many pictures will be added, and “here’s a sneak peek” in your tour or members area, you can keep them happy for months on end. Learn from your mistakes, ask for customer feedback and read through past support emails to plug any holes where people have had problems. Did someone have a hard time finding that cancel button? Make sure that both support and email links are found from your main page to your member’s area. TELL YOUR CUSTOMERS exactly what they will receive for their money and make sure to back it up in your member’s area. Be specific; don’t try to sell “tons of blond pictures”– try “5,000 pics of only blonds” for exactly how much and under what terms. 

Throw specials and get involved in your business. Have a “4th of July Sale” lowering your one monthly price “50% for a limited time” to encourage more monthly subscriptions over trials. Sell your wares, and don’t be afraid to make it exciting, just make sure it’s TRUE. If they signup at one rate make sure if you change your price in the future, those members still pay what they agreed to. There is nothing more frustrating than finding “extras” on an invoice or bill.

No Hidden Fees
Most customers only want to do fair business. By respecting their wishes, and not forcing checked crosses sales or anything “forced”, you can earn their trust that will encourage repeat business and longer periods of retention.

What You Can’t Control

Fraud Happens
Fraud happens. Well, that’s nothing to brag about but it does happen, let’s admit it. People have found so many ways to undermine online merchants that regardless of what business you’re in, everyone has to deal with it. I remember when I once pictured fraud as some guy in Russia with a list of credit card numbers leaning over his computer with a cig in one hand and a bottle of vodka at his feet typing in numbers in porn sites and hording content like a mad dog. These days my visual of fraud is more like a guy and a girl get drunk and there’s a computer and they decide to view some porn so she thinks she’s being cool when she offers to pay... but they end up being a one night stand and she’s pissed so she charges it back to Visa telling them “I didn’t do it!”. 

I mean, how can you beat that??? “Sorry ma’am but the camera we implemented in your Visa card shows you looking at your card at the time of that transaction”. Nice dream. There are a million different situations where a customer could defraud or abuse a merchant with no chance of any repercussions. As Visa is known to side with the customer and makes bold claims for “protecting the customer” from fraud, merchants are left to wonder what protection is left for them. Elements have recently been available to put into effect such as the CVV2 and “Verified by Visa” which require extra information; however this additional information has apparently yet to be taken into consideration when it comes to Visa issuing chargebacks. Why? Well consider that for Visa to fully investigate every claim the cost in resources and manpower alone would far outweigh what they would spend compared to what they earn in credits and chargeback fees and fines passed down to the merchant.

You can stress on your site that “Fraud and Abuse will be prosecuted” and use a script to display the user’s IP address before sending your traffic to any payment form. You can help to deter fraud if not completely prevent it. I would not recommend posting “Chargeback and we’ll beat you with a tire iron”, however sometimes less is more and subtly can get your point well enough across.

The Umbrella Unfolds
Every billing company provides a shield, an umbrella for adult sites to process money under. By accepting new accounts the IPSP agrees to take responsibility for what you are selling so they therefore have an earned right to place certain expectations on their merchants such as legal compliance including copyright and trademark laws as well as 2257, how the site is represented, and refusal to sell certain types of products and delivery methods. If a billing company gives you notice to change something about your site or lose your account, or will not approve you for any reason, listen to them regarding why and learn to come into compliance. Companies like PSW Billing Solutions are working hard every day to stay up to date and in compliance with Visa and other regulations to protect not only you but all of our online merchants. 

Rather than claiming unfairness, learn why certain regulations are designed to work FOR you, and do business within those means as best you can. You will soon find that every requirement is designed to give your customers a pleasurable experience and you the merchant the protection that you need.

Ultimately we all can look around and learn from our Webmaster peers and see why so many have had long term success. These regulations, from content to billing, are designed to keep your site out of the red zone and in the black. WORK with your billing company if you are currently over the 1% acceptable rate NOW so that by October you are within proper range. Rather than waiting for the billing company to catch up with you, check out your stats, re read your support emails, and COMMUNICATE to your customer on your site giving them a personal and exceptional experience.

As there will always be one bad customer in the bunch, but don’t let that 1% ruin you. Research your stats, track your levels, provide incentive for those monthly memberships and make your customers feel like they are getting a desirable deal. Treat your adult site like a business and the more you work for it, the more it will work for you regardless of any bump Visa (or anyone else) decides to throw in the road. We are the masters of the web, are we not? Now is time to become the masters of our sites of our customer’s satisfaction.

Cynthia "Cyndalie" Fanshaw is the Vice President of Marketing for PSWBilling.com. An established expert in search engine marketing, Cyndalie has over 5 years experience in the Internet industry and working with webmasters. For more information about PSW Billing Services please visit PSWBilling or contact Cyn @ PSWBilling.