What is a chargeback fee cost?
Chargebacks invariably lead to losses for the company. However, it is incorrect to think that the amount of these losses is limited solely to the cost of goods. The company incurs quite a few other expenses. Before a company can sell a product, it must store it somewhere. The process of packaging the goods, while not expensive, is also an expense for the company. Moreover, of course, we should not forget about the shipping costs, which the company bears in many cases.
Don’t we forget anything? Of course, we must also remember about costs such as the chargeback fee. What is a chargeback fee, how do the company’s obligations arise from it? These and other questions we will consider in this article.
What is a chargeback fee?
When we talk about chargeback disputes, of course, it is not just the merchant and the buyer that are involved. It is also worth remembering the other parties involved, namely the banks. To process chargebacks and resolve some contention points, these banks spend their time and other resources. To compensate for losses, they impose a commission, which merchants have to pay.
How much commission will the company pay?
The amount of commission that banks charge can range from £20 to £100. But the reality is that companies spend 3 or 4 times that much. To attract customers, they also need to invest their money, and they incur operational and other costs.
On the one hand, paying 3.5% of the transaction value for payment processing is not a problem, but not if we are talking about purchases of large sums. If a chargeback is requested on such transactions, the company’s commission may be pretty significant.
Control of inventory management, warehousing costs, costs associated with packaging and shipping of goods. All of these also amounts to about 15 to 20% of the purchase amount. In the case of a chargeback, no one will cover these costs for the company. Do you think that’s the end of the chargeback loss? Well, it doesn’t.
Don’t forget that many companies spend a great deal of money on advertising. Later, these costs are recouped from the profits received, but these profits are substantially reduced if there are too many chargebacks. The company has to find sources to cover these costs. And your bank may charge you a fine of up to 35% or even 40% of the transaction amount.
The bottom line is disappointing because if you sell a $50 product for which a chargeback has been requested, not only will you lose that profit, but you will also incur costs that are two or three times the amount of the purchase.
It’s important to understand that many of the costs associated with the chargeback are passed on to the company by the bank. These are costs related to payment security, processing, and so on.
The main threat from chargebacks
You already know what a PayPal chargeback fee is. You are well aware of how unpleasant it is for your company and that the actual costs associated with chargebacks can be three or more times higher than the commission.
Unfortunately, this is far from the most significant problem you will encounter. A large number of demands for refunds from clients will cause your firm to lose its reputation. All this can harm future orders, and those customers who previously thought about buying goods from you may change their decision, not in your favor.
What should a company do in such a situation? Make customer service as fast, high quality, and pleasant as possible, thanks to which the number of chargebacks should decrease.
If your company needs to deal with chargebacks, it is essential to partner with a trustworthy payment processing company. We at Payor value our customer’s payment security. Thus, we offer a wide range of payment solutons as well as high security measures.
Visit our solutions page for more information, or register a free account and start processing now.
Why is conversion really important?
Conversion directly affects the profitability of a business and investment. You can ignore the conversion rate and lose out to your competitors, or you can focus your efforts on increasing it and get several important benefits at once:
- Increase in income. If you increase the conversion rate you increase your income without spending millions on advertising which in reality gives zero return. The higher the conversion rate, the more your website benefits your business. The more interesting will be the content of the site, the more desire a potential customer will have to buy the product.
- Remarketing. High conversion is very important. All buyers are divided into 2 categories – those who bought the product once and those who become regular customers, buying again and again. Your goal should be to do just that. After all, whether you want it or not, most of the profits will come precisely from repeat sales.
How do you make the conversion rate higher?
You should not delude yourself into thinking that there is one golden formula for increasing the conversion rate, which will work 100% of the time and for any company. Alas, there is no such thing. But here’s the interesting thing … it turns out that for a significant increase in the conversion rate of the company sometimes need to make one or more changes. And they are not always expensive.
Numerous studies have shown that most sites with high conversions have a few things in common. For example, these companies’ sites load very quickly. Is this important? Of course it does! Today, even after waiting 10 extra seconds, a potential customer will close the site and go to a competitor. After all, they too will have the goods he needs.
Easy navigation. This is a very important factor, because customers need to quickly find the product they want, and not waste valuable time looking for it.
For the conversion rate to increase, it is important to offer visitors something of real value. The more valuable your offer is, the more likely it will be accepted.
Another not-so-obvious parameter is the choice of a reliable payment service provider. The checkout page plays a key role in the conversion, and over 18% of checkout abandonments come from an overly long and confusing checkout process. The Payor company offers merchants a payment gateway not only with low commissions, but also various payment tools, including 1-click payments. With us, you can easily customize a payment page and delight users with a modern design.
How to increase a conversion rate? Simple steps.
So, what you should do to increase the conversion rate.
- Step 1: Compare conversion rates now and in previous periods. Google Analytics, a tool everyone is familiar with, will help you to observe such statistics. Understand where conversions are decreasing, how visitors are using your site, and what makes them perform a target action. If you’re using a platform like Shopify, you can find the conversion rate and other essential data in Analytics.
- Step 2: Make sure you are trusted. For conversions to be higher, your visitors must trust you. Pass them through the so-called “trust threshold”. Until this happens, they can stay on your site for a very long time, but they will not buy anything. Offer them something relevant that will get rid of their doubts that prevent them from buying. Be sure to provide as much information as possible about the company and products. It will reduce uncertainty. Be sure to use social proof. It works very well.
- Step 3: Make sure your site is easy to use. The more often a user visits your site, the more likely they purchase. But they are unlikely to come back to you if they faced even the slightest problem with its usability. Look at your visitors’ session logs to determine when problems occurred and how to fix the most common ones. Google Analytics also has a special “Behavior” report to help you as well.
- Step 4: Pay attention to content. To increase conversions, it’s vital not just to fill your site with useful content, but also to add triggers that will encourage visitors to make an action. For example, an urgency trigger. Show visitors that they need to make a decision as soon as possible, and they’ll get the most out of it.
- Step 5: Provide A/B content testing. Conversion does not depend on the amount of content you have on your site but on its quality. By doing this testing, you can get completely unexpected results. By making the right changes, you can increase conversions by 20-30% or more.
Don’t forget that the conversion rate reflects sales, but its growth does not necessarily lead to a similar increase in profits. So don’t forget to analyze other important factors on which your profits depend.