Building a Chargeback Prevention Technology StackA Technology Combination That’s Ready for Anything
What Tools Do You Need in Your Technology Stack to Avoid Chargebacks?
Advances in technology always drive forward movement in the world. Chargeback prevention is no different.
You can’t rely on a hodgepodge of outdated, single-purpose tools anymore. Adding new solutions to an already subpar plan is not going to give you the results you need.
In this post, we’ll guide you through the process of building a resilient, adaptable technology stack. We’ll talk about some of the core components, and how they should work with your existing systems. The goal is to develop a robust system that addresses today’s threats while remaining flexible enough to adapt to future threats.
Tips for Selecting The Right Prevention Tools
Chargeback prevention tools come in two main forms: customer verification and fraud identification and deflection. Both focus on preventing chargebacks before they happen. And, new technology is making both increasingly powerful.
Dispute response tools can also contribute to chargeback prevention. That is not their main function, however.
For detection, look for solutions that leverage AI and machine learning to calculate risk scores and flag suspicious transactions before they’re approved. Also consider software that analyzes and tracks customer behavior to detect anomalies that may suggest fraud.
Verification is all about ensuring that the would-be buyer is who they say they are. Outside tools like 3-D Secure and Address Verification Service (AVS) can help here. For internal validation, look for software solutions designed around things like behavioral analytics, geolocation, and device fingerprinting. Also, multi-factor authentication (MFA) capabilities should be built into any verification solution you choose.
With so many tools available, how do you pick the right ones?
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Working Within Your Existing Systems
The technology you chose can’t just function: it has to function within your system. Tools that are agnostic — that will work with any hardware or software — are your best option.
For example, the inability to cross-reference chargeback data with specific customer behavior means you could miss potential fraud. That’s why it’s critical for chargeback prevention to connect seamlessly with your customer relationship management (CRM) system.
How Do You Know if It’s Working?
Is your technology stack working at peak efficiency? How do you know? Let’s look at a few of the key metrics to track for measuring success:
- Chargeback Ratio: Be sure your numbers remain below network thresholds.
- Dispute Win Rates: For comparison, specifically look at net win rates.
- False Positives: Is your system causing more issues than it resolves?
- Custom KPIs: Other measurable results based specifically on your organzation.
Choosing a Partner
The tools in your tech stack are often third-party services. That makes finding the right partner critical. Above all, go with a partner you trust and can work with. Ask for customer references before you make a decision.
Opting for vendors that prioritize an “API-first” approach is often your best bet; the tools they build will provide the flexibility to interconnect and adapt as your needs change. A similar tip is to focus on integration setups that prevent vendor lock-in. You should be able to swap out one tool for another without having to rebuild your entire system?
This is where data portability and regular backups can work to your advantage. If you can easily export your data off-platform and transfer it to another tool, you can reduce the power that any vendor has over your business. Preserving this agility allows you to upgrade as your operation grows, and pivot as the payments landscape evolves.
Should You Build or Buy Your Technology Stack?
While most find it more efficient to outsource, you don’t actually have to. If you're a well-resourced merchant, you can avoid finding a third-party partner and simply build it yourself. Only you can determine whether that’s the right fit for you, though.
When determining the more cost-effective of the two alternatives, make sure to account for all expenses. Upfront development costs are one thing, but you’ll also need to factor in maintenance and upgrade costs and other upkeep. For this reason, buying a specialized tool is often more cost-effective than building one from scratch.
