Chargebacks are a risk for any business that accepts debit cards, credit cards, or another form of electronic payment. It’s basically a cost of accepting electronic payments.
The work-around nature of many cannabis merchant processing solutions, like cashless ATMs, leaves cannabis businesses especially vulnerable to potentially crippling losses from chargebacks.
Hypur’s cannabis payment solutions utilize multiple processes to combat chargebacks and our customers experience almost no chargebacks. Below we explain chargebacks in more detail and how Hypur can save your business thousands in chargebacks.
What is a chargeback?
A chargeback is when a consumer asks their bank or cardholder to reverse a charge against their account. They are designed to protect consumers from fraudulent transactions or theft. For example, if your credit card is used for purchases you didn’t make, you could report these transactions and get your money back.
A key difference between a chargeback vs refund is that refunds are initiated by the business. You might have an error on a transaction, resulting in a reversal or refund, or you might agree to honor a customer’s complaint about quality or product and offer a refund.
While refunds can also be damaging for your business, they are not as bad as chargebacks. Your financial institution will generally be more understanding of refunds, with lower fees or consequences linked to refunds than chargebacks.
Every time you get a chargeback against your business, you will need to pay a fee. If you choose to dispute the chargeback, you’ll need to spend the time and resources required to prove that this was a valid transaction, which could mean showing receipts or surveillance footage. Either way, chargeback accounting can be a nightmare to reconcile. If you get too many chargebacks against your account, the bank could fine you or even close your account. If they close your account, you might even end up on the TMF or MATCH lists, blacklists that could make it hard for you to open an account in the future.
It’s worth noting that failed transactions like chargebacks could get flagged as giveaways or distributing free product. Depending on your state’s rules or regulations, that could be a serious licensing violation.
Even if you don’t face the worst consequences of chargebacks, they are bad for your business. You will have to pay a fee, lose the revenue on that sale, plus lose the product you sold in that transaction. It’s a pure loss for your business.
Chargebacks are another example of how the true cost of cannabis payment solutions goes beyond the transaction fees. Read the contracts carefully, understand the impact of the fees on customers, ask lots of questions including the chargeback rate of a payment providers cannabis customers.
How Hypur reduces cargebacks
Hypur Pay transactions have a significantly lower risk of chargebacks. That’s because we use direct, account-to-account transfers. Consumers need to use their Personal Access Code (PAC), so these transactions are seen as personally authorized by the financial institutions.
Hypur validates account information for security and to help prevent fraud. As a result, Hypur reduces the change that customers will have insufficient funds for the transaction.
Hypur transactions are clear on a consumer’s statement. Unlike shady payment schemes that might list a dispensary visit as purchase at a flower shop, payments with Hypur are clearly stated as such on the bank statement. This makes payments less confusing for your customers, plus reduces the likelihood that their bank or credit union will authorize a chargeback without a valid reason.
If you’re struggling with rampant chargebacks and little recourse, you need more reliable and sustainable payments for cannabis. Stop worrying about chargebacks ruining your business and start focusing on what you do best.