Business Models
Trial Offer
Definition
Trial Offer a promotional model offering free or discounted initial access before full-price billing begins. High-risk due to chargeback patterns when customers forget conversion or didn't understand terms. Acquirers scrutinize trial-to-paid conversion rates. Clear disclosure of trial terms, billing dates, and cancellation process essential. Some acquirers prohibit 'negative option' trials entirely.
Related Terms
Continuity Merchant
A merchant using a business model where customers sign up (often with a trial) and are automatically billed on an ongoing basis until cancellation. Includes subscription boxes, membership services, and auto-replenishment. Higher risk classification due to chargeback patterns from customers forgetting they subscribed. MCC 5968 (Direct Marketing - Continuity/Subscription) commonly applies.
Subscription Billing
A payment model where customers are charged on a recurring schedule (monthly, annually, etc.) for ongoing access to products or services. Requires card-on-file capability and careful attention to authorization rates, dunning, and involuntary churn. Card networks have specific rules for subscription billing including clear disclosure and easy cancellation. Higher risk classification due to chargeback patterns.
Friendly Fraud
Chargebacks filed by legitimate customers who received goods or services but dispute the charge anyway. Also called first-party fraud or chargeback fraud. Common scenarios include buyer's remorse, family members making unauthorized purchases, or customers not recognizing billing descriptors. Represents 60-80% of chargebacks in some verticals. Prevention requires clear communication, recognizable descriptors, and good customer service.
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