Risks of Card Fraud and Chargebacks in Sports Hospitality
A chargeback is a credit or debit card charge that is forcibly reversed by an issuing bank when a customer disputes that it was them that initiated the transaction. When sports clubs process match tickets or stadium tour sales by writing down card details or asking fans for card details over the phone/email/WhatsApp, it renders them susceptible to fraud and chargebacks. As the responsibility of inputting card details lies with the merchant, they face the risk that a) it is not the actual cardholder they are getting the details from or b) the cardholder may later deny they approved the transaction. In MOTO transactions, the bank will usually side with the customer and forcibly return the money.
All merchants accepting debit and credit card payments run the risk of being liable for chargeback disputes, costing their business valuable time, money and resources. Moreover it risks reputational damage and the termination of merchant accounts, as banks may penalise businesses that incur chargebacks beyond a certain threshold.
By 2023, even if we assume that chargeback volumes remains static, current data suggests that global chargeback costs may reach approximately 117 billion euros.The average industry cost per chargeback is expected to be approximately 190 euros.
Source: Chargebacks911, 2021
The Consequences of Not Fighting Chargebacks
1. Chargeback Fees and Penalties
Every chargeback incurred results in a penalty fee from your bank, which ranges from 15% to 40% of the total transaction value. If your monthly chargeback rates exceed a predetermined threshold, excessive fines in the ballpark of 12,000 euros will be levied against your sports club. If your monthly chargeback rates remain above the acceptable threshold, you run the serious risk of your merchant account being terminated. With a frozen merchant account, your ability to process credit card payments is revoked.
2. Cost of High Transaction Fees
Payment processors typically charge 3.5 % to 4% of the total transaction value simply to process a purchase. Frequent chargebacks, particularly in the case of high-value transactions, result in a lot of revenue slipping through the cracks.
3. Cost of Disputing Illegitimate Chargebacks
While merchants have the right to dispute illegitimate chargebacks, crafting an effective dispute takes a significant amount of valuable resources which could be better spent in business development. Without professional intervention, these chargeback disputes rarely achieve the merchant’s desired results.
4. Prommt’s trusted payment links outsource card number entry to the customer, and shift fraud liability to the card issuer and away from the merchant.
It is safe to say that with card fraud and chargebacks, prevention is better than a cure. Sports clubs must be proactive in making strategic technological investments to establish an efficient and secure method of remote payment collection, in order to protect their business from evolving fraud patterns, chargeback fees and penalties arising from fraudulent transactions.
Prommt is an advanced pay-by-link solution, compliant with Strong Customer Authentication and GDPR/UK DPA. We empower you to take remote payments by SMS and Email using our secure PCI Level 1 compliant checkout, avoiding the risk of data breach.
Our trusted payment links outsource card number entry to the customer, and shift fraud liability to the card issuer and away from the merchant. Customers are required to authenticate the transaction using their CVV (3 digit code) and 3D Secure.
Prommt accelerates your remote payment request process, allowing you to securely collect payment via Card and Bank transfer. We enable you to stay on top of all payment communications and issue reminders and refunds at the click of a button. Unlike manual payment collection over the phone, you can send multiple payment requests and receive multiple payments simultaneously with Prommt. We partner with all of the main payment providers in the UK, including Barclaycard, Clover/Fiserv, WorldPay and Global Payments.