A 3-Step Process to Building Out a Dispute Management System
Let’s clarify this point right up front: there is no “one-size-fits-all” solution to dispute management.
Transaction dispute management is a delicate process. A small business catering to a limited niche has needs that are very different from a mega-retailer with millions of customers. Also, deploying the wrong software or processes means wasting considerable resources. In some cases, it may even make you more vulnerable to chargebacks than before.
So, how do you find the right dispute management system for your situation? We’ll give you all the key questions you need to answer here. But first, let’s make sure we’re on the same page about what constitutes dispute management.
- The Top 10 Causes of Customer Disputes & How to Fix Them
- American Express Dispute Center: How to File Disputes & More
- Chargeback vs. Refund: Know the Difference?
- Chargeback Disputes: Is a Chargeback the Same as a Dispute?
- Authorization Reversals: Lost Sales are NOT Always Bad?
- What is a Transaction Dispute? Why Do Customers File Them?
What Qualifies as “Dispute Management?”
“Dispute management” is an umbrella term that describes different ways of controlling the impact chargebacks have on your business. It refers to the strategy you deploy to minimize the impact of disputes on your business. The tools and tactics you use to manage disputes are all part of that broader strategy to prevent chargebacks, recover revenue, and collect and analyze data to fine-tune your efforts.
Successfully managing disputes means addressing both prevention efforts and revenue recovery. The ultimate goal here is to prevent chargebacks wherever possible. However, fighting friendly fraud through representment and keeping your business’s chargeback ratio within an acceptable range are important practices, too.
Creating and implementing a good dispute management system can be challenging. The chargeback process is complicated. There are multiple parties involved, as well as tight deadlines and regulations that change constantly. However it is implemented, your system must take all of this into account.Learn more about chargeback management
What Can a Dispute Management System Offer?
Chargebacks can be incredibly expensive if left unchecked. First, you lose your revenue, along with any merchandise you’ve already shipped. On top of that, you get slammed with added fees, higher overhead, and threats to your business sustainability. As if that weren’t bad enough on its own, research suggests most chargebacks are either deliberate or accidental cases of friendly fraud.
It’s possible to manage disputes on your own. However, this becomes increasingly difficult and unmanageable as the number of chargebacks filed against you every month rises. This is where a good dispute management system comes in handy.
What are Chargebacks REALLY Costing You?
Annual Revenue Lost:
+ Chargeback Fees:
+ Admin Fees:
+ Cost of Goods & Shipping:
Total Annual Chargeback Cost:
An effective dispute management system has two fundamental functions. First, you prevent disputes wherever possible. Then, you recover money from chargebacks that were filed without a valid reason through dispute representment.
A well-suited dispute management system will save you both time and money when compared to running your chargeback management through manual, in-house processes. Having the right software, tools, and tactics in place can help you:
- Allocate staff and other resources more effectively
- Gain better insights through more accurate reporting
- Identify and address developing threats
- See long-term chargeback reduction
Service providers offer different methods of addressing these two needs. For instance, some providers only offer alerts, which are meant to intercept disputes and allow you to issue a refund before the bank issues a chargeback. Other platforms offer fully-managed options, covering the chargeback process from end to end. Still, others lie somewhere in between, offering a combination of self-managed and fully-managed options for different components.
Which Dispute Management System Works Best?
There’s no single answer to this question. At the end of the day, the challenge is to determine which service — or combination of services — will best fit your unique needs.
A SaaS (or “software as a service”) approach to the dispute management process is one option that merchants are exploring. Here, you license dispute management software on a subscription basis, then use that software to facilitate chargeback self-management. In contrast, a fully-managed solution lets you simply outsource your chargeback operations to a third party who will be accountable to you.
There are benefits to each approach. A SaaS-enabled dispute management system offers flexibility and a lower price point, making it attractive for small- to mid-size businesses. A fully-managed service allows you to be hands-off with chargebacks, trusting the experts to provide a better return on your investment while you focus your attention elsewhere.
You can also take a hybrid approach, adopting complementary components of a fully-managed and SaaS strategy. Some merchants choose to use software that automatically reviews chargebacks, then outsources the representment process to a third party.
It really boils down to two questions: would you rather keep dispute management operations in-house or outsource to a professional? Which functions should be allocated to which channel?
How to Build a Working Dispute Management System
Generally speaking, we can trace all disputes back to one of three fundamental sources:
AI-enabled source detection tools can help you demystify chargeback sources and pinpoint the exact cause of your disputes. After you segment disputes by their source, you can then tackle dispute management as part of a three-pronged strategy:
The Right Dispute Management System for Your Unique Needs
Ultimately, the right dispute management system for you is the one that’s best adapted to your unique needs. For instance, if you only have a small handful of chargebacks every month, you should be able to get by with an entirely SaaS-based approach. If you see hundreds of disputes monthly, though, a full-service option would be the most efficient and effective way to maximize your return.
In this exclusive guide, we outline the 50 most effective tools and strategies to reduce the overall number of chargebacks you receive.Get the FREE guide
Other important questions to ask as you develop a dispute management system include:
- Is decisioning rules-based? Any automated process you employ should be based on dynamic, and responsively-structured rules.
- Is it scalable? Your tools and strategies need to grow with you. It’s ineffective to constantly redesign your processes every few months.
- Is it software agnostic? Your dispute management system should be compatible with your other technologies.
- Does it offer relevant reporting? Accountability demands detailed, relevant reporting. It has to tell you what’s working and what needs adjustment.
Take Dispute Management to the Next Level
Remember that the points outlined above are parts of an exhaustive list. There are dozens of potential data points to gauge the overall effectiveness of your systems. In the end, you have to optimize your dispute management system according to what you’re trying to get out of it.
Of course, all these determinations ultimately boil down to one fundamental question: are you satisfied with your return on investment?
Chargebacks911® offered the industry’s first end-to-end dispute management system. Ten years later, we’re still delivering unparalleled results for our customers. From tactical dispute representment to risk assessment and dispute inquiries, we offer a multilayer strategy that’s customizable to your needs and available at a variety of service levels.
What is a dispute management system?
A dispute management system refers to the strategy you deploy to minimize the impact of disputes on your business. The tools and tactics you use to manage disputes are all part of a broader strategy to prevent chargebacks, recover revenue, and collect and analyze data to fine-tune your efforts.
Why do you need a dispute management system?
A well-suited dispute management system will save you time and money when compared to manual, in-house processes. Having the right software, tools, and tactics in place can help you identify and address developing threats, and see long-term chargeback reduction. You can also allocate staff and other resources more effectively and gain better insights through more accurate reporting.
Which dispute management systems work best?
There are generally two main categories for effective dispute management systems. First, a SaaS (software as a service) approach to the dispute management process is one option that allows merchants to license dispute management software on a subscription basis, then use that software to facilitate chargeback self-management. Second, a fully-managed dispute solution allows you to simply outsource your chargeback operations to a third party who will be accountable to you.
What makes a dispute management system effective?
Your system needs to be able to separate chargebacks by their fundamental source (merchant error, criminal fraud, or friendly fraud). To do so, there are a few things that should be baselines for your dispute management process. For example, you should embrace advanced fraud detection tools, an in-depth analysis of your internal practices, and a strategy for chargeback representment.
How do you craft the best dispute management system for your business?
The right dispute management system for you is the one that’s best adapted to your unique needs. That said, important indicators that you can use to judge the strategy’s effectiveness include rules-based decisioning, scalability, and reporting, among others.