As COVID-19 continues to wreak havoc on the global economy, companies are struggling to adapt and overcome. Surprisingly, this stands true for online merchants. Although some of their profit margins have never been better (thanks to mass quarantining), even businesses engaged in online commerce are now starting to feel the widespread effects of the coronavirus.
Covid-19 and the rise of chargebacks
Most people assumed that with everyone stuck at home, online merchants would be exempt from the economic blows of COVID-19. However, this has not necessarily been the case. Whilst the demand for their services increases, the virus has managed to exacerbate an array of problems for online businesses. One such issue that is garnering a lot of attention is the increase in frequency of chargebacks.
Chargebacks are a common issue experienced by online businesses, especially those in high risk industries. The term refers to the circumstance in which a customer denies a transaction and requests their money back from their bank. For high-risk merchants, this poses an issue because the nature of their products/services already affects their qualification for traditional payment processing. Chargebacks only serve to further aggravate this and result in businesses incurring additional charges from their payment service providers. Further, and on a more serious note, if a business’ chargeback ratio (per month) exceeds that of 1% they run the risk of credit card companies terminating their account– leaving them with the inability to process cards for payments.
Today, the pandemic is managing to exacerbate this problem. Some predictions see this getting worse with the entertainment industry set to experience a 50% increase in chargeback requests. Now, as this old feat continues to rise its head above water, many merchants are wondering what they can do to avoid chargebacks all together.
Eliminating chargebacks once and for all
Luckily for online businesses, the latest advancements in blockchain technology offer a viable solution to chargebacks. Built on decentralized networks, blockchain technology employs the use of cryptography. This ensures that all transactions incurred on the chain are immutable, making chargebacks virtually impossible.
An example of a solution that offers this exact benefit and more can be seen in the likes of PumaPay’s PullPayment Protocol. This unique architecture of smart contracts inverts the mechanics of crypto transactions, allowing the merchant to pull funds directly from their customers’ wallets according to predefined terms. The smart contracts also serve to enable payment methodologies to be enacted over the blockchain that were not possible before (such as recurring payments). These features, combined with the immutable recording of blockchain technology, serve to inhibit chargebacks and prevent friendly fraud.
Whilst the elimination of the middleman serves to benefit merchants, it should be noted that PumaPay’s payment solution still allows for refunds with the interest of protecting customer rights. The only real difference is that disputes originating from the refund requests are processed manually and handled directly between the merchant and their customers instead of a middleman.
The company’s solution is well summarized in the CEO, Yoav Dror’s statement:
“Our PullPayment technology offers a viable means for businesses to increase their revenue and eliminate chargebacks entirely. Although built with merchants in mind, our solution was designed to provide maximum utility to all.”
Conclusively, blockchain technology offers a suitable means with which online merchants can protect themselves from the negative effects of chargebacks. As COVID-19 continues to run its course on our global economy and chargebacks are set to steadily increase, many should look to this technology to protect their revenues and reduce overhead costs.
Are you looking to eliminate chargebacks for good?
Get in touch with the PumaPay team here!