How Effective is Your Current Chargeback System?
A chargeback system is difficult to manage—especially for new merchants. It involves a lot of intricacies relating to the people and processes. You’ll need to understand:
- The entire chargeback process, from start to finish.
- The relationship between the cardholder, bank, and merchant.
- The best system for effectively preventing and disputing chargebacks.
Chargebacks: A Basic Explanation
We have a really great article explaining what a chargeback is. You’ll want to check that out. In the meantime, a working definition of a chargeback is: the process of retrieving funds from the merchant and returning them to a cardholder after a particular credit card transaction has been disputed. This process is forcibly initiated by the cardholder and the corresponding issuing bank.
The Chargeback Process
Minor missteps could be costing you major revenue. Our Merchant Compliance Review can help.
The chargeback process is complicated, filled with time sensitive deadlines, documentation requirements, and legal proceedings.
The entire process starts with an unsatisfied cardholder. The most common reasons for filing a chargeback include:
- A customer is unsatisfied with the products or services that have been provided.
- The purchased items were not delivered to the cardholder.
- A billing error occurred (the card was charged twice, a reoccurring transaction wasn’t terminated, etc.).
- The transaction was not authorized.
- The consumer engages in friendly fraud.
Unsatisfied customers will contact their bank to file disputes. These disputes can usually be made online, over the phone, or in the mail. Regardless of the method, the cardholder must notify the bank within the predetermined timeframe for the given chargeback (usually between 60 and 120 days of the first bill that divulged the error).
If the issuer feels the cardholder’s argument has merit, the bank will notify the acquirer of the transaction reversal. The acquirer will then notify the merchant of the action taken and also charge a fee to compensate for administrative efforts.
The merchant has the right to dispute the chargeback. However, written documentation will need to accompany the representment claim. We have several tips that make the chargeback reversal process more successful.
After filing representment, the bank will re-review the chargeback. If they still find in favor of the cardholder, the funds will be permanently removed from the merchant’s account. If the bank finds in favor of the merchant, the cardholder will be charged for the transaction a second time.
Inefficiencies of an In-House Chargeback System
Most merchants use a chargeback system that requires them to handle the entire process in-house. The merchant is responsible for determining the best chargeback prevention techniques and navigating the representment process.
In-house chargeback management isn’t as successful as hiring a chargeback management company. DIY tactics usually fail for several reasons:
- Merchants don’t understand the complex chargeback jargon. The terminology used with one bank might not be the same as what’s required of another.
- Merchants don’t have the insider access to effectuate change.
- Merchants don’t have the necessary education. Chargeback management techniques are constantly evolving. New technologies emerge that are accompanied by unprecedented fraud tactics and schemes.
- Merchants don’t have the necessary resources. Chargeback management is a time-consuming process. The representment timeframe is very short. Responses have to be formulated quickly. With all the other daily business demands, it is nearly impossible to find the time to devise an effective representment case.
Most importantly, an in-house chargeback system robs merchants of their overall focus. Merchants should be worrying about methods to grow their business in the future, not fixing problems of the past. Growth depends on customer acquisition and retention, not juggling losses caused by finicky consumers.
A Better Chargeback System
Without professional help, there are only so many chargebacks that can be prevented. Most in-house chargeback systems are only capable of preventing a very small percentage of overall transaction disputes.
Additionally, DIY strategies aren't as successful at disputing chargebacks.
Because chargebacks are our primary focus, our prevention and dispute tactics are more effective than any other chargeback system. We also guarantee an ROI for all chargeback disputes. We only fight the cases we know you'll win: we won't let you waste resources on chargebacks that won't improve your bottom line.
Do you want to learn more? Contact us today and we'll tell you exactly how much you could save by using our chargeback system.