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Dating Site Chargebacks

Dating Site Chargebacks

Kiss Chargebacks Goodbye with These Helpful Tips for Dating Site Operators

The popularity of online dating grew exponentially over the last few years. According to data published by IbisWorld, online dating services in the US saw 11% annual growth between 2014 and 2019. But of course, running any successful online venture means securing merchant processing, and dating sites generally fall under the “high risk” designation. The main reason: dating site chargeback issuances.

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Here’s a quick snapshot of the online dating market in the US for 2019:

Sources:
https://www.statista.com/topics/2158/online-dating/
https://www.ibisworld.com/industry-trends/market-research-reports/other-services-except-public-administration/personal-laundry/dating-services.html
https://www.datingnews.com/industry-trends/online-dating-statistics-what-they-mean-for-future/

The Top 5 Dating Site Chargeback Questions…Answered!

Chargebacks are a surprisingly complicated matter. With that in mind, let’s delve in and answer some of the most often-asked questions about chargebacks, and how they relate to the online dating industry. We’ll explore why online dating services are marked as high risk, and what that means for individual merchants and the industry at large.

What Is a Chargeback?

A chargeback is a form of forced bank reversal. The practice was introduced in the ‘70s as a consumer protection mechanism: if a buyer fell victim to fraud or abuse, that person would have recourse to recover the lost funds in question. A cardholder can call the issuing bank associated with the transaction and request a chargeback. In some cases, the bank will even initiate a chargeback on their customer’s behalf.

What Causes Chargebacks?

There can be numerous potential chargeback triggers at different stages of a transaction. That said, we can trace all chargebacks to one of three fundamental sources: merchant error, criminal fraud, or friendly fraud. Merchant error and criminal fraud chargebacks are preventable, but you can only stop friendly fraud after the fact by going through the chargeback representment process.

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What Are the Consequences of a Chargeback?

For dating sites, each chargeback translates to lost revenue, plus you’re required to pay a fee to handle processing and administration. These disputes can add up in the long term, resulting in reputational damage and increased operating costs. You’ll also be forced to maintain a merchant account reserve, meaning part of your revenue will be inaccessible. Ultimately, you could even be placed on the MATCH list and lose your ability to process payments if the situation gets out of hand.

What Is My “Chargeback Ratio”?

A chargeback ratio is a measure of your monthly chargebacks as a portion of your total monthly transactions. Visa and Mastercard calculate this ratio differently; in fact, you’ll have a different chargeback ratio for each card scheme. Breaching acceptable chargeback thresholds enforced by the card schemes can lead to your business being placed in a chargeback monitoring program, or even losing your processing account.

Why Are Dating Sites Considered “High Risk?”

Dating sites are classified as high-risk merchants based on their merchant category code (MCC). The reason is simple: businesses who use this MCC tend to experience higher-than-average chargeback filings. You can still do business if you fall in this category, but it will require a high-risk merchant account. This offers some added leeway regarding chargebacks, but also entails added costs.

Why Do Cardholders File Chargebacks Against Dating Sites?

This is a complicated question, demanding a more in-depth examination. While we established that there are three fundamental chargeback sources, there are innumerable potential chargeback triggers relating to those sources.

While these triggers are not unique to dating sites, they often take their own unique forms based on industry. For instance, assume one of your customers pays for service, then—after finding a match—files a chargeback to recover the money.

The customer might rationalize this by thinking “I subscribed less than a week ago, and I was only on the site a couple of times!” But that’s still not fair to you: after all, you provided the service and helped the customer just as promised. This is a friendly fraud practice referred to as cyber shoplifting. Whatever the customer’s rationale, it comes down to the same thing: the intentional abuse of a chargeback to get something for free.

There are other, more benign threats out there, too. Take buyer’s remorse, for instance; a user may decide your service wasn’t what they were looking for, or could find some other option. They’re not entitled to a chargeback, but it’s a less cut-and-dry incident than blatant cyber shoplifting. You may also have a customer who signs up for a free trial, then forgets to cancel in time before being charged. This is a common problem among subscription-based merchants.

Chargebacks exist on a spectrum, with merchant fraud on one end, and cyber shoplifting on the other. Everything in the middle can be stopped either through prevention or representment, and up to 86% of chargebacks fall under this category. The trick: you need the right tools and strategies.

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Preventing Chargebacks for Dating Site Operators

Fall is what has come to be known as “cuffing season.” It’s not a formal designation, but the effect remains the same. The season really gets underway in September and October, meaning there’s a rush of dating app and site users underway.

The problem is that friendly fraud operates on a 45- to 60-day cycle. Thus, if there’s a surge of activity in September and October…you can anticipate the chargebacks to start hitting as Winter takes hold. Now is the time to act against these future chargebacks by implementing the following practices:

  • Develop a Clear Refund Policy: Customers should know exactly under which circumstances they’re entitled to refunds (if any).
  • Make Cancellations Easy: You don’t want to see customers leave…but it’s far better than a chargeback. That’s why you need to make cancelations as easy to submit as possible.
  • Explain Policies Plainly: You don’t want to leave any room for confusion or misunderstanding. Also, be upfront about recurring charges and subscriptions, especially if involving free trial offers.
  • Use Clear Billing Descriptors: If customers can’t identify your charge on a billing statement, they may mistake it for fraud and file a chargeback instead.
  • Excellent Service: This goes without saying, but providing consistent, round-the-clock assistance via multiple service channels is a great way to reinforce customers’ confidence in your service.
  • Identify Suspicious Users: Watch for behaviors that suggest fraud, including making changes to account details like location, age, or photos immediately after enrollment. Criminals also tend to send more messages, and make more connections than other users. Also, because it’s not their money, bad actors tend to spend more than genuine customers.

You must remain vigilant about fraud and chargebacks, no matter the source. If you need a hand, Chargebacks911® is here to help. Click below and learn how we can reduce chargeback filings and recover more revenue, all backed by a 100% ROI guarantee.


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