Chargeback Protection: What are Your Options for 2024?

Payment Platforms Offer Chargeback Protection, but Merchants May Need More Help

Let’s say someone offered you a quick fix for your business that could virtually eliminate chargebacks. Would you be interested?

A lot of merchants probably would be. Unfortunately, there is no way you can completely insulate yourself from all chargebacks.

The right to dispute a credit card charge is a federal mandate. As long as that consumer protection mechanism is in place, you’ll always be subject to potential disputes. That said, there are plenty of chargeback protection tools and techniques you can use to keep your business safe. You just need to understand the basics of chargeback protection — before and after a transaction, and even those practices to consider after the chargeback is filed.

What Is Chargeback Protection?

Chargeback Protection: Chargeback protection is any service, procedure, or technology used by merchants to reduce chargeback issuances. This can involve preventing fraudulent chargebacks, mitigating the worst impacts of chargebacks, or conducting research to identify chargeback sources.

“Chargeback protection,” as we talk about it here, refers to any of the various programs or platforms that insulate your business from the effects of chargebacks. There are three main forms we want to discuss:

Chargeback Protection Type	What is it?
Pre-Transaction Chargeback Prevention	Identifying and stopping fraud and errors before a transaction is authorized.
Post-Transaction Chargeback Prevention	Responding to fraud and errors after the transaction but before a dispute is filed.
Post-Transaction Chargeback Protection	Dispute representment, pus proprietary programs that assume liability for certain chargebacks.

You can opt to implement tools that stop fraudulent sales prior to authorization, preempt customer issues prior to a chargeback, or which reimburse you for eligible costs. All these chargeback protection solutions work in collaboration to protect your revenue and your chargeback ratio.

Pre-Transaction Chargeback Protection

Pre-transaction prevention tools let you identify potential fraudulent transactions prior to processing. These are tools that can help you resolve fraud and chargebacks before they happen.

There are three primary categories of pre-transaction chargeback protection we want to discuss: fraud screening, fraud scoring, and merchant best practices.

Fraud Screening

These are free or low-cost tools that help verify buyers’ identities prior to completing a transaction. Some commonly used tools include:

Address Verification Service: AVS automatically checks the transaction billing address against the address registered with the bank.
Card Security Codes: CVV codes are printed on the card and cannot be stored elsewhere. Without the card, fraudsters won’t know the code.
3-D Secure: 3DS2 is the technology behind automated fraud detection programs that compare over 100 data points to verify the buyer as the actual cardholder.
Fraud Blacklists: These help by blocking sales to known or probable fraudsters based on anything from an IP address to the purchaser's location.
Velocity Limits: Velocity limits (or checks) scan for potential fraud based on how quickly a buyer submits multiple transactions.

Learn more about fraud detection tools

Fraud Scoring

Fraud scoring uses machine learning to examine each transaction. The aim is to try and identify traits and trends associated with suspicious behavior. The tool then provides simple up-or-down decisioning as to whether transactions should be accepted, rejected, or manually reviewed.

You can submit flagged transactions for manual review. You also set fraud scoring technology to automatically reject transactions that do not pass.

Learn more about fraud scoring

Merchant Best Practices

Improving customer service procedures and optimizing logistics and fulfillment will increase loyalty and build better customer relationships. In the process, you also make it less likely that cardholders will turn to a chargeback. We recommend adopting all the following practices:

Personalize the customer experience.
Provide live, round-the-clock customer service.
Make live service easily accessible by phone, email, and social media.
Offer free, “no questions asked” return shipping.
Ensure all staff are properly trained on customer service best practices.
Be transparent about costs, shipping times, etc.
Always look for opportunities to optimize and improve the customer experience.

Learn more about customer service best practices

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Post-Transaction Chargeback Protection

Deploying a post-transaction chargeback protection tactic is not ideal. If you’re doing this, it means that a dispute has already been triggered, either by fraud or some merchant error.

In some situations, you may be able to resolve an issue by providing additional information. In others, you’ll need to refund the purchase; in these cases, your chances of getting your merchandise back are low. In either case, however, relying on post-transaction chargeback prevention is still far better than getting hit with a chargeback.

Chargeback Alerts

Chargeback alerts allow you to refund transactions, thereby avoiding chargebacks. Network-affiliated banks will notify you of a pending dispute before a chargeback is filed. You then preempt the chargeback by refunding the cardholder.

Chargeback alerts can lower chargeback issuances up to 20% in a matter of days. The Chargebacks911 Alerts Management Platform combines CDRN notifications, Ethoca Alerts, and other solutions for the most comprehensive coverage.

Learn more about chargeback alerts

Order Insight

Like chargeback alerts, Order Insight allows you to intercept disputes before a chargeback is filed. Unlike alerts, however, automated inquiries offer resolution options beyond just issuing a refund.

If a Visa customer contacts their bank about an unrecognized charge, banks participating in Order Insight can request additional transaction information in real-time. If the new data doesn’t refute the claim, a refund is automatically issued. Either way, potential chargebacks are preempted.

Learn more about Order Insight

Consumer Clarity

Consumer Clarity is a dispute resolution platform created by Ethoca, delivering real-time data sharing between participating merchants and cardholders. This two-way communication can help resolve transaction inquiries that would otherwise become chargebacks.

Consumer Clarity is similar to Order Insight. It works with Mastercard transactions, whereas Order Insight is applied to Visa purchases. The goal of both, though, is to resolve a cardholder’s issue without the need for a formal chargeback.

Learn more about Consumer Clarity

Rapid Dispute Resolution

Visa's Rapid Dispute Resolution (RDR) provides an automated solution that allows you to instantly resolve some disputes before they escalate into chargebacks.

RDR leverages Visa's advanced algorithms to identify transactions eligible for immediate resolution. These decisions are based on predefined rules that you choose to set. If a dispute meets these criteria, RDR automatically issues a refund to the cardholder, preempting the need for a lengthy dispute process.

Learn more about Rapid Dispute Resolution

Mastercom Collaboration

Mastercom Collaboration offers merchants and financial institutions a streamlined approach to handling chargebacks and dispute resolutions.

This collaborative effort leverages the Mastercom suite, a set of tools designed to facilitate efficient communication between all parties involved in a dispute. You can access detailed transaction data, submit evidence in response to disputes, and track the status of ongoing cases through an intuitive online platform.

Learn more about Mastercom Collaboration

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Post-Chargeback Protection

Once a chargeback has been filed, it might seem like the end of the road for the disputed transaction. However, there's an important step you can take to not only recover lost revenue but also to prevent similar chargebacks in the future. This is referred to as chargeback representment.

Learn more about representment

This process involves disputing a chargeback with evidence to prove that the transaction was legitimate and that the customer's dispute is invalid. Representment helps you:

Recover Revenue

Chargeback representment offers you a second chance to recover revenue from disputed transactions. You can present compelling evidence that supports the legitimacy of the original transaction, such as sales receipts, delivery confirmations, and communications with the customer. This lets you make a strong case to reverse the chargeback.

This evidence is reviewed by the bank or payment processor, which then makes a decision on whether to uphold the chargeback or return the funds to you. Successfully overturning a chargeback lets you recover funds from the lost sale.

Reputation Protection

Engaging in representment signals to banks and payment networks that you are proactive about disputing unwarranted chargebacks. This can lead to a more thorough review of disputes associated with your business.

Moreover, successfully disputing chargebacks can deter fraudulent claimants. When fraudsters see that you are diligent about contesting chargebacks, they may be less likely to target you, knowing their attempts at fraud are more likely to be challenged.

Better Chargeback Source Data

Representment exposes false chargeback claims that might be hiding behind false reason codes.

You can identify patterns or vulnerabilities in your processing or customer service practices by analyzing the reasons behind chargebacks and the types of evidence that successfully overturn them. This insight allows for the implementation of strategic changes to reduce the risk of similar disputes arising in the future.

Important!

To maximize the effectiveness representment, you need to develop a strategic, multilayered approach. This includes a timely response to chargeback notices, meticulous record-keeping to quickly gather compelling evidence, and understanding the specific guidelines and requirements for representment set by different card networks.

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What About Chargeback Insurance?

Some third-party providers offer “chargeback insurance.” At first glance, it seems this would work like any other insurance. You’ll pay a regular premium and be reimbursed by the insurance company in the event of a chargeback… right?

You must remember that insurance policies vary considerably in their coverage. Chargeback insurance is no different. Every policy will have different requirements, different exclusions, and different price points.

Some will be redundant—overlapping with existing coverage—while others only work with certain processors and gateways. The range and scope of protection will be limited, at best. Chargeback insurance is not inherently bad, but it should never be your first line of defense.

Learn more about chargeback insurance

The Bottom Line

While chargeback prevention tactics will help in the short term, most do not address the underlying causes of disputes. Unless you can resolve chargebacks at their true source, you’ll end up fighting the same battles over and over.

An effective long-range chargeback management strategy must be flexible enough to identify new trends and techniques, counteract new technology, and adapt on the fly to a constantly shifting landscape.

Chargebacks911® offers the most comprehensive chargeback management services and products available today. No other provider can deliver our level of transparent, end-to-end chargeback management, going beyond prevention to revenue recovery and future growth.

Whatever you need to prevent chargebacks, we can help. Contact us today for a free demo.

FAQs

What is chargeback protection?

Chargeback protection is any service, procedure, or technology used by merchants to reduce chargeback issuances. This can involve preventing fraudulent chargebacks, mitigating the worst impacts of chargebacks, or conducting research to identify chargeback sources.

Is chargeback protection worth it?

Yes. Chargeback protection helps reduce financial losses by preventing fraudulent transactions and resolving disputes efficiently, thereby preserving both revenue and customer relationships.

How can I protect myself from chargebacks?

You can prevent chargebacks by implementing strong fraud detection measures. You should also provide clear, responsive customer service to address disputes promptly, and maintain transparent transaction policies.

What is a chargeback guarantee?

A chargeback guarantee is a service where a third-party provider assumes the risk of chargebacks for a fee, promising to cover the cost if one occurs. It’s also referred to by some as “chargeback insurance.” While this can offer peace of mind, its effectiveness depends on the provider's ability to mitigate disputes and the specific terms of their coverage.

Chargeback ProtectionYour Chargeback Management Options for 2024

In a Nutshell

Payment Platforms Offer Chargeback Protection, but Merchants May Need More Help

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