Chargeback Management Companies: What You Need to Know
A chargeback management company isn’t something most merchants think about…until they need one, that is. When chargeback rates start surging and keeping them in check starts requiring too much time and manpower, you might start to wonder if some chargeback companies offer a better answer.
Chargeback companies offer various levels of management. Some provide basic consulting, while others offer full, end-to-end service to take chargebacks off your plate completely. Which service level you need will be determined by your business's particular situation.
But, even if you know what you need, how do you go about finding it? With a wide variety of companies and an even wider range of marketing claims, looking for a partner who can handle your chargeback prevention and response process can be overwhelming.
In this post, we’ll look at what chargeback companies do and how to evaluate your own chargeback management needs. We’ll also explore ways to cut through the hype and see what different companies have to offer.
What Are Chargeback Companies?
Managing chargebacks requires time, expertise, and manpower. Unfortunately, DIY attempts often deliver minimal results. Many merchants could see a much greater return on investment by working with a chargeback company.
Chargeback services providers—commonly known as chargeback management companies, or simply chargeback companies—provide specialized third-party assistance in the area of chargebacks. Some offer limited services; for instance, helping merchants reduce the number of chargebacks filed against them, or challenging illegitimate chargebacks. The most effective of these companies do both of these things and provide additional services as well.
Hiring a third-party chargeback company offers multiple benefits. The question: how can you know which service will best suit your needs?
As you might suspect, the first step is knowing which questions to ask. When evaluating chargeback management firms, you should look for one that offers the services you need now as well as things you might need in the future. The more comprehensive the platform, the more likely all the services will seamlessly mesh. This is important, even if you won’t be using some of those services right away.
6 Questions to Ask Before Choosing a Chargeback Management Company
When comparing chargeback companies and services, there are several things you’ll need to consider. The first one is perhaps the most obvious:
Do I need really need professional help?
Strictly speaking, all businesses are capable of managing chargebacks in-house. Theoretically, card networks provide all the guidelines and tools you need to prevent and dispute chargebacks.
In reality, of course, having access to the tools doesn’t mean it’s easy to implement them. Understanding and adhering to all the requirements can make your head spin. To be highly successful, you must be able to:
- Read, analyze, and interpret thousands of pages of complex industry regulations.
- Stay abreast of constantly evolving regulation changes, adjusting your process accordingly.
- Keep track of constant changes in compliance requirements of card networks, processors, financial institutions, and government agencies.
- Be able to look beyond reason codes to identify the source of each chargeback, recovering the most revenue without responding inappropriately.
- Create professional, compliant, and accurate dispute cases, usually under tight deadlines.
- Objectively monitor internal policy issues which could trigger chargebacks.
There’s more, of course. However, the point is that determining your need for a chargeback company requires careful consideration of the entire range of capabilities and services.
Smaller merchants with few chargebacks may be able to handle chargeback management in-house. That said, all businesses can benefit from some degree of professional assistance. The key is to identify areas of weakness in your processes, then outsource those responsibilities. Just remember to focus on sustainable ROI, not quick fixes that won’t last.
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What should a chargeback management company help me do?
For the most effective results, your solution needs to address both sides of the chargeback issue: prevention (keeping chargebacks from happening) and representment (disputing illegitimate chargebacks to recover revenue).
The goal of chargeback management is to prevent as many chargebacks as possible. There are a number of methods of accomplishing this. No single tool, or combination of tools, will work for every merchant in every situation, though.
For example, chargeback alerts serve an important function. They help prevent certain types of chargeback claims. If you’re not receiving that type of chargeback, though, a provider who only offers alerts won’t be any help to you.
Representments work at the other end of the chargeback chain. This process allows you to challenge illegitimate (i.e. friendly fraud) chargebacks, recovering your revenue in the process.
Many chargeback companies rely solely on automated representment. This offers a few benefits, such as greater efficiency. But, even with advanced AI and machine learning, technology can only do so much. Trusting your business’s bottom line to a “one-size-fits-all” solution with no human oversight can be dangerous.
What kind of results can I expect?
Since there are two aspects of chargeback management, you’ll want to evaluate two key performance indicators (KPIs): the reduction of chargeback issuances, and your chargeback win rate. Most chargeback management companies will advertise impressive results, but many do not supply context for their claims.
Marketing materials may not tell the whole story. In many cases, the fine print can really just be an opportunity to camouflage a lack of core competencies. For example, take a look at the following chart:
|What They Say||What They Really Mean|
|“We have fully automated systems.”||We offer standardized results, with no human forensics.|
|“We can’t fight chargebacks for digital products.”||We artificially inflate your win rate by refusing to fight difficult cases.|
|“It’s not wise to fight all reason codes.”||We lack the tools and expertise to distinguish friendly fraud from criminal fraud.|
|“We don’t support international processing.”||Since eCommerce is a global market, you may have to change providers if your business grows.|
|“We can prevent all of your chargebacks.”||We know you don’t understand this, so you won’t understand that what we’re offering is impossible.|
|“You can process your own alerts through a portal access point.”||We won’t conduct due diligence on past chargebacks to ensure you don’t pay for the protection you didn’t receive.|
Other marketing claims can be similarly misleading. Win rates—while important—need to be evaluated in context. Here are some considerations when asking about win rates:
Is the win rate based on disputing all illegitimate chargebacks?
Challenging all illegitimate chargebacks is essential for long-term sustainability. Providers can inflate their win rate by only counting the cases they fought, though, rather than all the chargebacks you received.
Does the win rate take second chargebacks into consideration?
Many reversals escalate to second chargebacks. This lowers your real win rate and costs you significant revenue. You may not know it, though, because your service provider might not report that information.
Does the company offer a concrete guarantee?
Most chargeback management companies offer some type of guarantee. Chargebacks911, however, is the only solution on the market that offers an ROI guarantee based on actual performance, not generic numbers.
There are other KPIs that should be evaluated too. Examples of these include a reduction in issuer declines, client retention rates, and increased conversions. An essential component of a quality solution is transparent, real-time reporting.
In this situation, quality beats out quantity. Hundreds of different reports aren’t helpful if you can’t glean any valuable information from them. The Chargebacks911 solution combines comprehensive data collection with customizable reports, showing only the data you decide you need.
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Will your chargeback management software integrate with my current platforms?
The best chargeback management service must be heavily integrated with other merchant service providers. It should also be completely agnostic when it comes to hardware and software.
Your provider should be able to communicate seamlessly with processors and gateways for faster onboarding, tighter integration, and ongoing management efforts. If your provider isn’t able or willing to create custom integrations for the CRM, processor, or gateway you currently use, you’ll be forced to put more resources into additional hardware and training.
Chargebacks911, for instance, offers integration with hundreds of industry partners. This allows our clients to start eliminating chargebacks faster than with other service providers.
What is and isn’t included?
Your individual needs will help you decide how extensive the product offering should be. Here are some things to consider:
For global eCommerce, look for service providers with an international presence and the capability to work with any currency.
Some chargeback management companies limit their representment services to certain reason codes. This means some otherwise disputable chargebacks won’t be challenged, resulting in pointless revenue loss for you.
Sometimes it’s beneficial to receive extra assistance. That said, don’t go with a company that isn’t a good fit simply because they adding “freebies” that you may not even use.
Multiple Service Levels
You may only be interested in managing certain responsibilities. Look for a provider who can offer assistance specifically in the areas you need it. At the same time, your needs may change, so keep future growth in mind.
What does chargeback management cost?
Cost depends on a variety of factors. There are several ways in which chargeback companies might assess fees, including:
- Regular monthly fees
- Paid-on-performance pricing
- Per-user fees
- Per individual action (“a la carte” service)
In addition to ongoing fees, some companies assess upcharges for things like consultations, while others provide those services for free. A set-up or integration fee may be required, as well as a cancelation fee. If price is based on transaction volume, you need carefully consider future growth potential.
Finally, some companies suggest long-term contracts, while others allow you to cancel with just a few days’ notice. In the end, the best payment plan is a dynamic model that fits your needs now but is flexible enough to grow with you.
Looking for a Chargeback Management Company?
After reading this post, you may find yourself interested in learning more about working with a chargeback management company. If so, contact Chargebacks911 today. We can set up a demo, talk about your specific requirements, and answer any questions you may have.
What is a chargeback management company?
Chargeback companies provide specialized third-party assistance in the area of chargebacks. Their services range from basic consulting to comprehensive, end-to-end service.
What should a good chargeback management company help me do?
For the most effective results, your solution needs to address both sides of the chargeback issue: chargeback prevention and chargeback representment/revenue recovery. Chargeback companies should generate a return on investment in both areas of chargeback management.
What should I look for in a chargeback company?
The most important thing to consider is compatibility, both with your existing processes and technology and with your company’s goals and philosophies. Scalability and an international presence are key for future growth.
What questions should I ask of different chargeback companies?
Ask about past representment win rates and your anticipated win rate. You should also ask what types of guarantees they offer. Make sure all these items are well-defined, so you can make apples-to-apples comparisons between companies.