Chargebacks and payment defaults

Chargebacks are very rare. However, so that you know how to react, we have compiled all the important information here.

1. ​What happens in the case of a chargeback

A customer decides to make a chargeback to Digistore24 and informs us of it. The chargeback transaction is created as soon as Digistore24 learns of the chargeback. Below we describe the possible scenarios that can follow.

Fees for chargebacks by direct debit

For direct debit chargebacks, a fee of 12 € (for direct debits from Germany) or 15 € (for direct debits from Austria) will be charged. It is listed as chargeback fee in the commission list of the order. The amount visible there results from the processing fees on the part of the bank, the accounting expense and the costs which our acquirers claim per transaction.

Chargebacks for subscriptions and installment payments

For subscriptions and installment payments, the customer receives an email with the subject: There is a problem with your order and a link to continue the payment. At the same time, an IPN notification is sent to you (Event: chargeback) so that your system blocks access for the customer until they pay again.

At this point, there is no further attempt to debit. The subscription or installment payment is automatically stopped and access is blocked for the customer. Only the customer can start further debit attempts by clicking the reactivation link and by subsequently entering their data.

2. ​Possible reasons for a chargeback

Here are the possible reasons for a chargeback:

  1. Customer error when entering the account number
  2. Lack of account funds. This leads to a chargeback by the customer’s bank
  3. Proactive chargeback by the customer

If neither the customer nor the customer’s bank advisor can explain how the chargeback came about, then it is always due to an incorrect entry. You can claim the damage you have incurred from the end customer through the chargeback fee. If you have suspicious customers, you can also request that a customer be placed on the blacklist. Learn more about blocking customers here​.

3. ​Make another debit attempt

As a vendor, you have the possibility to try to process a failed debit again.
For this, however, you absolutely need the consent of the customer!
Once your customer has agreed to another debit attempt, you can proceed as follows:

  1. In the vendor view, go to Reports > Transactions .
  2. Click on the magnifying glass icon of the relevant transaction in order to view the transaction details.
  3. Scroll down to the field Journal and click on Resume payments.
Note:

Failed debits often have a good reason. In most cases, the customer is currently financially unable to pay. You should therefore take this step very cautiously, since you risk unnecessary chargeback fees.

4. ​How to reduce your chargeback rate

The average frequency of chargebacks on Digistore24 is 1 to 2%.

These are the most important factors for reducing the rate:

Your product quality

If you offer your customers an excellent service through your product/service, customers who have had a chargeback respond with panic and urge us to provide them with a new payment option. Therefore, if you offer an excellent product, your chargeback rate will reduce significantly.

Your product description

Enter an exact and detailed description of your product on both your sales and thank you page. Clearly state the form in which you will deliver the product (digitally or by post).

The quality of your customer service

If a customer has questions, they should receive a helpful answer as quickly as possible. This way, you prevent the customer from carrying out a chargeback because they are frustrated with your customer service.

Position your product with an affluent audience

If the target group is less affluent, then the probability is higher that the account will not be covered – not out of willful intent, but simply because of the financial situation of the customer wanting to buy your product.

5. ​Distribution of chargeback costs for joint venture products

The chargeback fees are distributed proportionally among the JV partners.

The previously determined shares (e.g. 75% and 25%) will be applied to the new situation; in this case, to the chargeback fee. The vendor with 75% of the revenue must also pay 75% of the chargeback costs. The vendor with 25% of the revenue only has to pay 25% of the chargeback costs.

Sample calculations for chargeback fees

6. ​Your most important questions regarding chargebacks and payment defaults

How likely is it that customers will still pay after a chargeback?

This varies greatly from customer to customer. The probability is over 90% for first-class products, and 0% for unpopular products that simply frustrate customers.

How does the customer get the option to pay again?

The customer receives a payment request from us by email with a link which they can use to pay the missing amount.

Why are there isolated cases of chargebacks despite refunds or cancellations?

In principle, end customers can arrange a chargeback with their bank within a period of one year. This is something that the customer does with their house bank and therefore it completely evades the influence of Digistore24. The following examples are rare, but are within the realm of possibility. We thus present them to you here for the sake of completeness:

Example 1

The customer cancels a subscription and then makes one or more chargebacks at their bank. At Digistore24, a cancellation can be received and successfully initiated – but this only means that further debits have been stopped. What can happen is that the customer still decides to have old direct debits returned, although no further debits are made.

Example 2

The customer requests a withdrawal and still makes one or more chargebacks at their bank. At Digistore24, a cancellation can be received and successfully initiated (the processing time is approx. ten working days) – however, this only means that a chargeback is planned. What can happen, though, is that the customer still decides to have old direct debits returned, although no further debits or chargebacks are made. In this case, we will lodge a complaint due to fraud and take action against the customer. Here, too, a chargeback liable to fees is issued.

How does Digistore24 protect me against non-payment by my customers?

Digistore24 ensures your security and reduces the rate of payment defaults by taking the following precautions:

Protection through credit checks

Digistore24 works together with Creditpass to protect you from possible payment defaults. This protection is already included in the basic price.

Before a payment is processed, a central database checks whether the customer has already attracted negative attention in their bank transactions. This database is linked to Schufa and various financial institutions. If the customer is on a blacklist, the payment will be rejected in order to protect the vendors from possible chargeback fees.

To prevent access to the product in the event of a failed payment, Digistore24 has an API interface through which the system can communicate with the member software.

The interface can be reached here​.

However, if there are payment defaults by customers, Digistore24 will send emails to these customers requesting that they settle their outstanding invoices.

Digistore24 internal blacklist

We at Digistore24 also have a blacklist on which we note down people and their data who we no longer want to be customers. These people are excluded from further purchases on Digistore24. Customers can be entered on the blacklist both manually and automatically. Customers are automatically recorded at the point when they become suspicious due to frequent chargebacks or refunds.

There is no selective activation of blacklist customers for the payment methods PayPal and credit card or other payment methods, since we do not wish to create a collection point for customers with complication potencial.

Note: Customers remain on the blacklist if their payment to chargeback ratio is 50:50.

Updated on 23. January 2020

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