The Best Chargeback Prevention Tools for Merchants
You want to prevent chargebacks from damaging your business and your reputation. But, with so many of service providers pitching the latest chargeback prevention technology, it's hard to know which solution is right for you.
In this post, we’ll break down your options for chargeback prevention tools. We’ll distinguish between pre-transaction and post-transaction technologies, and help you understand what each product brings to the table. Finally, we’ll discuss the best way for you to incorporate these tools into your current chargeback prevention strategy.
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- Payment Authentication: How to Verify Buyers Before a Sale
- How Do You Find the Right Chargeback Management System?
How Do Chargeback Prevention Tools Work?
Chargeback prevention tools work by targeting a specific threat source, like unauthorized card use, buyer’s remorse, or policy missteps. This gets complicated, though, because there are hundreds of potential triggers that can cause a chargeback. Each one demands a different response.
The key is the strategy you build around those tools.
Any single tool or product may prevent a handful of chargebacks, but each tool you implement can provide another layer of protection. Employing a multilayered approach to dispute prevention will give you the best results. Adding too many layers or implementing the wrong tools, however, can actually work against you.
All chargeback prevention tools fall into one of three primary categories:
Chargeback prevention tools that identify potential chargeback triggers and resolve problems before the transaction occurs.
Tools aimed at intercepting and resolving disputes that are already in-progress, but which haven’t yet advanced to the chargeback phase.
Tools that help identify the reasons chargebacks happen and provide guidance to resolve issues before they become disputes.
In the following sections, we’ll break these categories down into more detail, and outline some basic chargeback prevention tools we recommend as part of your strategy.
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Post-Transaction Chargeback Prevention Tools
You can think about post-transaction chargeback prevention tools like a stop-gap measure. They don’t address any of the underlying issues that cause chargebacks, but they can help protect you against disputes when all else fails. For this reason, they’re usually the first step that merchants take when trying to get chargeback issuances under control.
We can break these tools into two different categories. First, let’s look at chargeback alerts.
Chargeback alerts allow merchants to refund transactions to avoid chargebacks. They are a great tool to quickly lower your chargeback rate without impacting customer friction. But, how exactly do they work?
Let’s say one of your customers calls their issuing bank to dispute a charge. If the issuer is part of the alert network, you'll be notified of the pending dispute before a chargeback is filed. You can then avoid ththat chargeback by issuing a refund instead.
Chargeback alerts are very effective at reducing chargebacks caused by friendly fraud. In fact, these chargeback tools can offer up to a 20% reduction in chargeback issuances in a matter of days.
There are two primary alert networks: Ethoca (now owned by Mastercard) and Verifi (now owned by Visa).
Like the CDRN, Ethoca Alerts notify you before a bank proceeds with a chargeback, allowing you to resolve the dispute on better terms. The Ethoca Alerts network incorporates more than 5,100 banks, allowing merchants to prevent millions of chargebacks every year.Learn more about ethoca Alerts
At Chargebacks911®, we also offer our own proprietary chargeback alerts network. The Chargebacks911 Alerts Management Platform gives you the benefit of this proprietary chargeback alert solution, combined with CDRN notifications and Ethoca Alerts, for the most comprehensive coverage.
Like chargeback alerts, network inquiry tools allow you to intercept disputes before a chargeback is filed. These chargeback prevention tools are widely available to merchants through the card network.
Let’s say one of your customers calls their issuing bank to inquire about a charge they don't recognize. Previously, the issuer had few options other than filing a chargeback to resolve the inquiry. Now, issuers participating in a network inquiry program are able to request additional information about the transaction. This lets you automatically resolve potential friendly fraud disputes before they happen.
Both Visa and Mastercard offer proprietary inquiry products through their counterparts:
Verifi Order Insight
Order Insight from Verifi works as a plugin for the Visa Resolve Online platform. The company describes this tool as “an end-to-end chargeback solution that empowers issuer personnel with merchant CRM and order details in real-time, so that all parties can better recognize, remember and validate the sale.”Learn more about Order Insights
Ethoca Consumer Clarity
Ethoca Consumer Clarity operates in a manner similar to Verifi Order Insight, but applied to Mastercard transactions. It provides purchase information to cardholders' bank staff, including your name and logos, purchase location details, and itemized digital receipts.Learn more about Consumer Clarity
Finally, we also want to touch on Rapid Dispute Resolution (RDR), which is another product from Verifi that can help you automate the chargeback prevention process.
Rapid Dispute Resolution
RDR allows you to create rules and set parameters for pending disputes. You can use these presets to dictate which disputes they’d like to automatically accept and provide funds back to the cardholder. This way, you can prevent a chargeback for these transactions by addressing the dispute before it progresses to the next stage.Learn more about Rapid Dispute Resolution
Pre-Transaction Chargeback Prevention Tools
Pre-transaction prevention tools let you identify and prevent fraudulent transactions before they're processed. Since these charges will always result in a dispute, detecting them before the order is processed should be filed under "best practices."
There are two primary categories of pre-transaction chargeback prevention tools available: fraud screening and fraud scoring.
There are numerous free or low cost tools you can deploy to verify buyers’ identities. Many of these are legacy tools that have around for years. Newer technologies are also being introduced on a regular basis, though. The newer tools tend to be more effective at preventing fraud since criminals are less able to circumvent them.
Fraud screening tools include:
Card Security Codes
Card security codes are another authentication tool that helps ensure the shopper has physical possession of the card being used. These codes are printed on the card, and cannot legally be stored by either the merchant or the processor. The cardholder must reenter the digits with every purchase.Learn more about security codes
3-D Secure 2.0
Implementing 3-D Secure 2.0 (or 3DS2) provides yet another level of fraud authentication by asking customers to enter a predetermined security code. The tool works like an online PIN code. Fraudsters have no way of knowing the security code, and the tool stops the transaction from being complete if the valid code is not entered.Learn more about 3-D Secure 2.0
A blacklist helps ban known or probable fraudsters. Whether these individuals are engaging in criminal or friendly fraud, establishing a blacklist can ensure they only cause trouble once. The blacklist can block orders by something specific, like an individual IP address, or by something generic, like the purchaser's country of origin.Learn more about chargeback blacklists
Visa Account Updater (VAU)
Visa Account Updater is a credit card information clearinghouse that helps prevent chargebacks associated with incorrect card data. Simply put, VAU notifies you of updates whenever a cardholder’s account information changes. This helps manage recurring transactions and ensures you have the most up-to-date account information to process transactions.Learn more about Visa Account Updater
Velocity limits, or velocity checks, scan for potential fraud based on the rate at which a buyer submits multiple transactions. This allows you to segment out suspicious transactions, identifying cases in which a fraudster might be engaged in card testing, or trying to run multiple transactions with a valid card number.Learn more about velocity limits
Fraud scoring uses machine learning to examine each transaction based on an extensive variety of indicators. It then provides simple up-or-down decisioning as to whether you should accept or reject the purchase, or subject that transaction to manual review.
Many service providers offer their technology as all-inclusive risk management platform to let you offload this process entirely, including (in no particular order):
Kount’s patented digital fraud prevention solution means fewer chargebacks and declines, plus lower operational costs. It’s used by some of the world’s largest payment service providers, gateways, processors, and acquirers.
Riskified uses machine learning to instantly differentiate between good and bad actors, allowing merchants to approve more orders (with a 100% chargeback guarantee) while providing a frictionless customer experience.
Signifyd offers fraud protection for eCommerce backed by a 100% financial guarantee. Their technology identifies both good and bad consumer behaviors—reducing losses, lowering rejections, and increasing revenue.
Ravelin provides technology and support to help merchants prevent evolving fraud threats and allow them to accept payments with confidence. They offer machine learning, access to a global fraud network, and more.
Source Detection Prevention Tools
Understanding why chargebacks are happening is one of the most underappreciated components of chargeback prevention. If you aren't sure why your customers file chargebacks, you're likely to implement the wrong tool to address the problem. Furthermore, the chargeback tools you do implement may be "Band-Aids" that fail to address the root causes behind the disputes.
Chargebacks911 has invested heavily in tools that provide genuine chargeback source detection. We empower our clients to prevent chargebacks by addressing underlying issues directly. These proprietary tools allow our customers to prevent more disputes and recover more revenue than they can on their own, or even with other service providers:
Error-Risk-Threat (ERT) Notifications
Error-Risk-Threat (ERT) Notifications from Chargebacks911 are the industry’s first-ever alert system designed to identify and flag chargebacks resulting from merchant error. The ERT Network examines dispute data to identify recurring patterns in chargeback issuances. It then drills-down to identify risk factors that cause these disputes. Armed with this data, the ERT Network can send up-to-the-minute notifications and action steps to help merchants eliminate chargeback risks.Talk to a specialist about ERT Notifications
Intelligent Source Detection
Intelligent Source Detection (ISD) is a proprietary technology designed specifically to pinpoint the true cause of chargebacks. ISD deploys a unique combination of machine learning and human expertise at the transaction level. This allows it to identify dispute patterns and pinpoint specific factors that responsible for your chargebacks.Learn more about Intelligent Source Detection
Preventing Chargebacks and Retaining Revenue
Preventing transaction disputes is a complicated task. Your best bet is to consider proven-effective chargeback prevention tools, while keeping in mind that at the end of the day, even the best among them are just that: tools.
Chargeback prevention tools are useful. For maximum benefit, though, they still require knowledgeable and experienced people to wield them.
Few merchants have the necessary resources available to consistently prevent chargebacks. There are simply too many variables that can change on a day-to-day basis. Your time, effort, and energy are much better spent growing your business for the future, rather than addressing chargeback issues of the past. That’s where we come in.
The fully-customized, turnkey, end-to-end chargeback solutions offered by Chargebacks911 can take chargebacks off your plate, delivering a guaranteed ROI. Prevent chargebacks. Recover revenue. Contact us today to learn more.