Do get back to us in about 6 months to let us know how your merchant account is performing in regard to chargebacks. In my experience, we never win with our merchant bank, yet almost always win with PayPal.
If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that.
- what they actually bought
- how to contact you
There are a dozen little things you can do to reinforce the message that "we don't want your money unless you're amazingly happy". If your customer wants his money back, he'll get it one way or another. If you make it easy to simply reverse the transaction through you, they won't ever need to get their bank involved.
This is a fairy story.
We have a no questions asked 60 day full refund policy. We have at least one chargeback a week due to stolen credit cards. We, of course, don't have any reason to fight them over it, so we just accept the chargeback when that happens. But, we definitely get chargebacks.
I do occasionally get phone calls from people who don't know who we are. I answer their questions, and if the description doesn't ring a bell (sometimes they'll say, "Oh, I need to ask our system administrator if he bought that." and I never hear from them again), I process a refund immediately.
But, software companies definitely get chargebacks. There's no way to completely avoid fraud without refusing lots of legitimate customers (AVS, for instance, doesn't work for most non-US card holders, and we do half of our business outside the US, so we can't reject orders with an AVS mismatch).
My audience is highly technical, and the particular segment is rife with piracy. Even though our product is 95+% Open Source (and so there is a free version that people can use to do nearly everything the commercial version does), we still have people who use stolen credit cards to order our products.
And, it may also be a factor of product pricing. Your products are under $100, right? Ours run from $149-$999.
Sounds like our sales volume is actually about the same as yours. Looking over the actual numbers, chargebacks are less than my initial estimate. More like once every 2-3 weeks, and sometimes we'll go a whole month or two between; but some months we'll see a rash of them. It averages out to a couple a month.
But, it's definitely something we deal with regularly. Are you doing anything in particular to prevent fraudulent orders, or is it just the nature of your customer base that it simply doesn't use stolen credit cards to buy software?
Also, how much of your business is international? We've found that 95% of our fraudulent orders are from overseas (but 50% of our legitimate orders are also from overseas, so we're not willing to make it difficult for those folks to buy from us).
We actually can back that up - Fog Creek is a FeeFighters customer!
Most people, when noticing their card has been stolen, will simply request chargebacks of every unrecognized item on their bill. The vendor never hears about it, and has no idea it has happened, until after the chargeback has taken place.
Anyway, I am just sharing about the differing experiences we have had with PayPal and with our merchant bank.
But regardless of who you're technically fighting with, it's still a matter of you trying to keep money from people who want it back. I can't come up with very many reasons you, as a business, would ever want to do that. All you'll accomplish is making those customers angry enough to tell the world how much they dislike your business, and they'll still get their money back through the chargeback.
Seems like a losing proposition.