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Lower Chargebacks With eContracts

May 24, 2023

Lower Chargebacks With eContracts - PayKings

As it would be called by a millennial, a digital contract, or commonly referred to as an eContract, is a contract that a retailer sends to a buyer electronically, similar to those sent out using DocuSign; and you definitely should not miss out on the benefits of this service. Requiring that a buyer sign an eContract prior to releasing a product or offering a service can help clarify the service or product, boost your merchant chargeback security, specify your terms of repayment, and safeguard you from legal issues.

Utilizing eContracts will significantly better your odds of winning fraudulent chargeback claims,  when the merchant would otherwise lose in these chargeback instances. In short, an electronic contract means that you’ve adequately explained, in clear terms, your goods or services in addition to the agreement terms – in this case, the customer will have no significant defense for a chargeback claim. That being said, make sure the eContract is constructed by you for the best defense against chargebacks.

In fact, eContracts can increase your probability of winning a chargeback dispute to nearly 90% rather than in the industry’s typical 30%.

The following is a guide to accurately executing a merchant eContract for buyer clarity and chargeback protection:

1. Explain the Purchase Process in Detail
Your eContract should describe, in depth, the specific price of the item or service including any fees, taxes, cost of shipping, or additional charges. The customer should understand what they are paying for and your charge card issuer should clearly make sense of your terms and regulations when moving through an eContract in the event of a chargeback dispute.

Narrowing down the buying process is essential because sometimes buyers claim an overcharge in a chargeback dispute and forget the expense of service or a particular product. Ensuring that the customer signs an eContract will give you an upper hand in a chargeback dispute.

2. Acquire Proof that the eContract reached the Client
That copy of your eContract is only helpful if the merchant receives it, goes through it, and signs it. There’s no question that the eContract software should record the contract time and date of the eSignature, as well as the IP address and the buyer’s signature.

This proof can help you win chargeback disputes against shoppers that claim not to have seen a copy of a receipt or the eContract.

3. State that the Credit Card type employed for a transaction in your eContract
An eContract must prominently display the card type (Visa, Discover, MasterCard, AmEx) together with its last four digits, expiration date, and CVV number. Doing so is helpful in identifying which card was used without revealing sensitive customer data, and may minimize the chances of you facing a “card not approved” chargeback dispute.

4. List your Full Refund Policy on the eContract
Even though you may fully disclose your refund policy on the company website, you still need to have it explained, at length, in your eContract. In the scenario of you adding it solely on your website, a customer can file a chargeback claiming to have never been informed of the refund policy. We have seen tens of thousands of retailers have to issue client refunds they shouldn’t have, due to illegitimate chargeback claims, simply for not prominently displaying the refund policy.

To be sure you aren’t forced to comply with unwarranted chargebacks, add your return policy on your site’s order page, but also have it shown on the electronic contract that a buyer signs. In the policy, mention the time limit, terms and conditions, and any restocking fees that will apply for a return.

All in all, successfully using eContracts can allow you to reduce your company’s chargeback rates by almost half.

author avatar
Kyle Hall CEO

May 24, 2023 | High Risk Merchant Account | Kyle Hall