An especially important consideration that is often an afterthought during the digital ordering setup process, is the matter related to chargebacks. Reasons, why this subject is often neglected, are uncertain; however, one thing is for certain, restaurants who offer the digital convenience of online ordering, should and must care about chargebacks. If not, your restaurant’s digital ordering program could be bleeding your profits dry.
What is a chargeback?
Whether an electronic payment was received for a purchase made in-store, or online by virtue of digital ordering, a chargeback on a credit card payment happens when the customer asks their bank to return, or refund their payment.
The nature of chargebacks
Chargebacks most commonly occur when a customer cannot get a refund from a vendor. This may be due to several reasons. However, rather than providing a list of mind-numbing reasons why chargebacks occur, the big takeaway is to acknowledge that chargebacks do still exist and to be aware that chargebacks can and will occur during the life of your digital ordering program. This is just the cost of doing business sometimes and by no means, should this hinder, nor discourage you from setting up your own digital ordering system. The benefits far outweigh the costs or any chargeback fees.
To date, there have even been reports of digital ordering-related chargeback cases, involving a customer who had placed an order online, picked up their meal in-store, waited an hour then decided to notify their banking institution to report that their credit card was fraudulently used to place the order.
We are all human and sometimes without just cause that’s beyond our circle of influence, a customer may decide to escalate matters into their own hands and resort to clever Plan B system gaming tactics by notifying their financial institution because they simply wanted a refund. In turn, the vendor is forced to refund the customer and a chargeback occurs. The nature of chargebacks is endless.
Ramifications of chargebacks and digital ordering
Restaurants who decide to adopt digital ordering should also be aware there are ramifications involving chargebacks. Each time a customer decides to file a chargeback, your food establishment may be required to pay penalty fees that can range from $10 to upwards of $100, or more per transaction relative to the chargeback amount.
Another noteworthy mention, if a merchant receives chargeback claims too frequently, their cost per transaction may also be significantly increased, and even have their account run the risk of closure.
Should this discourage my restaurant from offering digital ordering?
Absolutely NOT! There is no need to worry. Most credit card issuers and other financial institutions have formal chargeback policies and procedures that endeavor to work with merchants to create the best resolution in terms of win-win to ensure that chargeback claims are appropriately investigated with the strictest due-diligence. In fact, some financial institutions even allow merchants to purchase chargeback insurance coverage in the event of a chargeback. This insurance will help cover some or the full cost of chargeback fees.