For adult websites, managing refunds and cancellations isn’t just about customer service. It’s a crucial factor in maintaining compliance with the regulations of payment processors and payment networks such as Visa and Mastercard. As “high risk” businesses, adult sites tend to face stricter regulations and monitoring, more consumer disputes and greater financial risks. Higher chargeback rates put them at risk of account freezes, terminations, increased reserve requirements and more intense transaction scrutiny. This confluence of factors makes a well-crafted and well-managed refund and cancellation policy essential.
This guide will walk you through best practices for strategically fine-tuning your refund and cancellation policy in order to minimize disputes, reduce chargebacks and protect your business. We’ll cover everything from clear communication strategies to leveraging technology for dispute prevention.
Check your policy language to make sure it meets Visa and Mastercard network rules.
First, let’s look at some of the main challenges and how to address them.
Privacy
One of the biggest challenges stems from privacy concerns. Users of adult sites expect discretion, and if they feel that their privacy is not being respected, they may choose to cancel. Fortunately, how you interact with those consumers via your billing and support channels can help decrease abrupt chargebacks. Be sure to do the following:
- Use neutral descriptors on billing statements. This helps maintain privacy so that users do not feel they must dispute a charge in order to prove something.
- Offer clear, private communication channels for support requests. The consumer may jump ship if there’s no discreet way to interact with your brand.
- Avoid overly complicated cancellation processes that frustrate users and lead to chargebacks. When users want to cancel, ensure it’s an easy and seamless process. Frustration is the fuel for dispute.
Posting a clear refund and cancellation policy that demonstrates compliance can also help reassure users and alleviate concerns about privacy.
Friendly Fraud
One of the biggest chargeback scenarios in the adult industry is “friendly fraud.” This occurs when a user did indeed access your service or content, but disputes the legitimate transaction for one of several reasons:
- They don’t recognize the charge. We touched on billing descriptors earlier. While discretion is important, a billing descriptor that is too obscure can lead to confusion, so some degree of branding identifiability on billing statements is important.
- They regret an impulse purchase. There’s no industry more subject to impulse purchases than adult. This can be both a blessing and a curse, but we can reduce the “curse” part through vigilance.
- They want to access content for free. Unfortunately, some users exploit refund policies to access content without paying. While this occurs across various industries, the adult sector is particularly vulnerable.
Friendly fraud can be challenging, but you can prevent much of it by maintaining a clear and transparent refund and cancellation policy. Let’s look at the best strategies for crafting such a policy — one that protects both you and the consumer.
Tailoring Your Language
Words matter. Use plain, concise language on your website pages to explain how refunds and cancellations work. This should include eligibility, timelines and overall presiding conditions. Use visuals like infographics or bullet points to summarize the key policies if necessary.
Most importantly, your refund and cancellation policy should be easy to find. Users will typically look for it in the FAQs, user dashboard and checkout pages, so make sure your policy is easily accessible and prominently displayed in all those places.
A well-communicated policy discourages impulsive chargebacks and ensures users understand their rights upfront.
Aligning with Card Brand Rules
Your refund and cancellation policy must align with the regulations of the card networks, most notably Visa and Mastercard. Check your policy language to make sure it meets Visa and Mastercard network rules. Outline a clear process for handling disputes that encourages refunds rather than dreaded chargebacks.
Leveraging Technology
Today, there are multiple ways that technology can assist you in reducing chargebacks. It’s important to leverage such tools at every point in the user experience.
First, send an automated email confirming a membership cancellation immediately, to assure the user that the cancellation process worked.
Second, track the reasons why users cancel or dispute billing transactions. Artificial intelligence can help you leverage this data to better understand where your refund policy is firm and where it may be weak. Tracking and analyzing dispute reasons and outcomes enables you to adjust your processes and language to avoid future problems.
There are other steps you can take as well. Clear content previews, an easy-to-access dashboard and upgrade incentives can all help minimize buyer’s remorse, while pre-renewal emails can reengage customers before they cancel.
By following these guidelines and instituting a strong refund and cancellation policy, adult merchants can not only minimize financial risk, improve customer retention and reduce chargebacks — they can also build trust and reinforce value.
Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.
