Chargebacks in Ticketing: What It is and How to Prevent Them

CEO of ChargePay
July 5, 2024
All posts

Live events, concerts, sports, or just about any other entertainment event are all booming. Accessing them has become easier than ever before, thanks to online purchases.

This easy access, however, comes at the cost of frequent chargebacks. 

The event industry is a common target for chargebacks because of its nature. The popularity and profits from tickets make them an easy target for fraudsters. The surcharge from the resale of tickets to trending events is tempting and probably easy to chargeback.

But they can all be either prevented or managed efficiently if you have access to the right tools and strategies. This article gives it all to you. Discover the root cause of chargebacks, strategies to manage them, tips, and best practices you can follow to prevent them from happening.

What are chargebacks in ticketing?

Chargebacks are on account of dissatisfaction or issues faced by customers. They escalate their issue to the issuing bank or their card network, depending on who offers this facility and the medium of transaction, demanding a reversal of the charge. 

Focus on ‘reversal’, which is not similar to how refunds work. Unlike refunds, chargebacks are not initiated by merchants but rather involuntarily reversed by the issuing bank. Also, the process is not instant, but rather time-consuming and requires multiple actions. 

If merchants initiate a refund for reasons such as cancellation of an event, it is a refund. However, if a customer reports a ticket and demands a reversal for an issued ticket, it is a chargeback.

Chargebacks in ticketing

The process of receiving and handling chargebacks is pretty simple:

  • Initiation - customer chargebacks a transaction.
  • Investigation - the issuing bank investigates the chargeback and issues a reversal.
  • Notification - merchants are then informed about the reversal with a reason code that deciphers the reason for the chargeback.
  • Response - merchants have two options to select from while responding to the chargeback. Accept the chargeback and lose revenue, or fight the chargeback and prove the legitimacy of the transaction.
  • Evidence submission - merchants who choose to fight a chargeback have to submit evidence to prove the legitimacy of the transaction along with a rebuttal letter.
  • Decision - based on the evidence submitted, the issuing bank makes the final call. If you win, you earn your revenue back, and vice versa.

How strong of a case you build for the chargeback will make or break your chances of getting your revenue back. To build a compelling case, you need to be equipped with the right knowledge. Knowledge of the reasons chargebacks occur and what evidence you need to prove your case.

Why do chargebacks occur in ticketing?

Chargebacks in the events industry do not function like regular chargebacks. The reasons chargebacks occur in this industry are unique, such as the secondary market, disasters, pricing benchmarks, and more. Let’s get a clear look at the reasons below:

1. Friendly fraud

There are instances of friendly fraud that are either genuine mistakes or done with malicious intent. Like, when one of the two cardholders makes a purchase that the latter does not recognize and chargeback. A person is unaware of the nonrefundable clause. Other times, a person might try to chargeback a nonrefundable ticket, trying to paint it in the shadows of a fraudulent transaction. Sometimes, people simply want something without having to pay for it. 

All such instances are classified as friendly fraud. It somehow affects merchants like you, and you should be wary of all of them and build processes to deal with and prevent them.

2. Secondary market

This is a case exclusive to the ticket industry. Some events are huge deals, and people want to grab a seat. There are people who take advantage of the demand by trying to make a profit out of the resale of these tickets in the secondary market. Plus, the secondary market is not monitored, hence buyers there encounter counterfeit tickets and all other types of fraud, which can be chargebacked for your legit transactions.

3. Fraud 

Tickets for exclusive and most awaited events are pretty valuable and, hence, an easy target for fraud. Fake tickets, unauthorized transactions, phishing attacks, and more are some of the common frauds that cardholders encounter.

4. Event dissatisfaction

Sometimes events are overhyped, or there’s a plain gap in expectations. There can also be generational challenges, like the outcome or expectation of an event for Gen Z not being similar to that of the Millennials, like crowds, seating arrangements, food choices, and more. Any sort of dissatisfaction with the event may also lead to chargebacks.

5. Billing error

Any errors and system issues that lead to billing errors, such as incorrect prices, double billing, payment status updates, and more. It doesn’t matter if the system failure is on the merchant’s end or the payment gateway’s end, the transaction is charged back and hence, you have to deal with it.

6. Others

There are many other situations, such as miscommunication or misunderstanding of timing, dates, refund policies, and more. Outdoor events get disrupted due to natural calamities that aren’t under anyone’s control. 

Also, with the demand for tickets, the prices tend to go up. People unaware of these situations or pricing benchmarks might chargeback tickets they had to purchase at a hiked price. 

What’s the best way to handle chargebacks in ticketing?

Have a defined process for each of the reasons in place. Benchmark the steps and requirements and double down on them. But, it’s not as simple as it sounds.

In terms of steps, your employees need to be aware of the appropriate actions to take, such as replying to a chargeback, collating the right materials, staying aware of the timelines, and more. 

When it comes to requirements, your employees need to know the right documents they need to prove their case. Documents such as transaction records, communication with the customer, proof of service delivery, and so on are required to win the case. Furnishing the right evidence is the tiebreaker.

Beyond that, let’s check out some best practices you can follow to handle chargebacks:

  • Record keeping - monitor all your transactions closely and keep them on record for unfavorable situations like chargebacks. They serve as evidence and a source for future research.
  • Transparency - ensure your ticket’s terms and conditions are communicated. Follow clear billing descriptors that customers are aware of and can understand. Also, communicate all the details of the event to set expectations. 
  • Fraud prevention - adopt security tools and services like AVS, CVV matching, etc to fight fraud. Choose the secure payment gateway option to enhance security and help provided.
  • Customer support - offer an easy and approachable customer service team available on multiple channels for quick resolutions. Encourage your customer to reach out to you first before going for chargebacks by offering refunds and rewards. 

Furthermore, you can come up with unique strategies and processes tailored to your unique business model.

Here are some insider tips for you:

  • Make sure you add a rebuttal letter with your evidence and keep it short and easy to digest.
  • Send your response within the stipulated time. Otherwise, the chargeback is automatically accepted and you will lose your revenue.
  • Be smart, and spend your time and resources only on chargebacks where the return is greater. It doesn’t make sense if the cost of your time and labor is more than the chargeback recovery amount.
  • While drafting the response to chargeback, keep the evidence to the point. Avoid long explanations and tons of evidence to build a strong case. Bank representatives do not have the time to go through lengthy responses.
  • Note the format, requirements, and formalities of the particular issuing back/card network in question and follow it. 

Can you shield your business from chargebacks?

You cannot 100% avoid chargebacks, but you sure can shield your business from a portion of them. Following the best practices will help you prevent chargebacks, but the process is tedious. Fear not, because you are not alone when it comes to dealing with chargebacks.

Situations such as friendly fraud and the resale of tickets are pretty tough to deal with. They are a big blow to your bottom line because they happen on a scale. Scammers generally deploy chatbots to buy tickets in bulk and resell them in bulk. And there is little you can do if you are unaware of the right way to deal with such a situation. That’s where experts can come to your rescue.

You can choose to get some help from software solutions such as ChargePay. We are an AI chargeback management solution that can help you recover over 80% of the revenue that’s lost in the process of chargebacks. 

Our solution is easy to use and effortlessly integrates with leading payment processors, including PayPal, Shopify, Stripe, and more. We can help you save a lot of time and resources in the process, thereby helping you maximize profit generation. 

Want the best chargeback management process for your company? 

Get started with ChargePay.

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