Disputing Chargebacks: 8 Common Myths & Misconceptions
Need Help Telling Chargeback Fact from Fiction?
There’s lots of information, tips and tricks floating around about fraud, chargebacks and how to deal with both.
Unfortunately, a lot of it is wrong!
To effectively manage chargebacks, merchants need to be wary of the common myths, misunderstandings and misconceptions about friendly fraud and disputing chargebacks. Heeding inaccurate advice will not only lead to a lot of unnecessary revenue loss, it could negatively impact the longevity of a business.
It’s time to separate chargeback fact from fiction.
Myth #1: Visa and MasterCard charge additional fees for disputing chargebacks
A lot of merchants assume there are additional costs imposed by the card networks for disputing chargebacks.
In reality, each card network encourages merchants to not only dispute illegitimate chargebacks, but to maintain a proactive stance. In fact, in Europe, a merchant is charged an additional fee for not disputing chargebacks.
Without providing valuable feedback information, merchants are agreeing with the “guilty as charged” verdict that is assigned with every case. Since friendly fraud has become such a popular consumer behavior, these guilty verdicts are issued with increasing frequency and will severely damage the merchant’s reputation.
Consumers have learned that criminal fraud runs rampant, thanks to highly-publicized data breaches and the fraud after a data breach, as well as hackers and identity thieves. It’s common knowledge that credit card information can be easily compromised. Cardholders are compelled to exploit this reality, knowing that any transaction labeled as fraud will illicit prompt attention from the bank. Banks incentivize this action by offering protections like zero liability and believing the old adage ‘the consumer is always right.’
Therefore, the most important component to consider when deciding whether or not to dispute chargebacks is not necessarily the cost, but rather, which ones are illegitimate and which ones were rightfully assessed.
When left to their own devices, merchants struggle with the task of identifying chargeback sources. Fortunately, Chargebacks911™ created Intelligent Source Detection, a tool that determines exactly which of the three chargeback sources is to blame. Now, merchants can separate chargebacks that are rightfully assessed from those that are illegitimate, meaning more chargebacks can be disputed and more revenue recovered.
Myth #2: Disputing chargebacks will hurt customer loyalty.
Here is an argument we hear often: “Losing all of the potential lifetime revenue from a cardholder is not worth winning a chargeback.”
This misunderstanding ties back to the first myth. If a merchant believes all chargebacks are undisputable cases of criminal fraud, it is understandable that the merchant also believes that disputing these chargebacks will damage customer relations.
If a merchant does disputes a case of actual, legitimate criminal fraud, there could be negative repercussions. But, if the merchant can definitively point to brazen attempts of cyber shoplifting, there is no risk of alienating a ‘loyal’ customer.
Additionally, failing to address the source of these chargebacks will only make matters worse. There are two realities to consider:
- If a formerly loyal customer has filed a chargeback, the merchant-customer relationship is already severely damaged. That chargeback likely resulted from an innocent merchant error that was perceived as a calculated attempt at fraud.
- Forty percent of friendly fraudsters will seek a second illegitimate chargeback within the next 90 days. These repeat offenders are not loyal customers.
Merchants need to review their policies and procedures to ensure there aren’t any points of friction in the customer experience that could lead to a chargeback. Check our Merchant Compliance Review for more information.
Also, merchants need to solicit the help of a professional chargeback manager whose philosophies and tactics won’t jeopardize customer retention rates. At Chargebacks911™, our years of experience have enabled us to dispute chargebacks without damaging customer relations.
Myth #3: Disputing chargebacks is not cost effective.
When debating whether or not to dispute a chargeback, many merchants only consider the short-term ROI. They might even have a threshold for disputing chargebacks. For example, any transaction dispute over a certain dollar amount will be subjected to representment, anything below that amount will be accepted as a loss.
If the cost of the time, effort, and energy used to dispute the chargeback costs more than the amount able to be recouped, it’s tempting to forego representment.
That’s why merchants need to focus on the long-term ROI.
Short-term ROI means recovering revenue. Long-term ROI means recovering revenue and improving the merchant-issuer relationship, preventing future chargebacks, and ensuring the business’s longevity.
When merchants don’t dispute chargebacks, they tacitly admit guilt in the eyes of issuing banks. As a result, issuers feel less incentive to exercise due diligence in successive chargeback cases. By disputing chargebacks, however, merchants encourage issuers to be more skeptical of potential friendly fraud.
As evidence of this claim, we can look to a recent Chargebacks911™ case study. Chargebacks911™ assisted 12 participating merchants through the use of our Tactical Chargeback Representment product. Results after 90 days yielded a 9.34% reduction in chargeback issuances. These results were achieved solely through the improvement of the merchant-issuer relationship with strategic, compliant chargeback disputes that proved the merchants’ innocence.
Myth #4: Second chargebacks make the process too time consuming.
Creating an effective representment is a time-consuming process. To make matters even worse, the time commitment is doubled if the consumer counters with a second chargeback.
All it takes is a couple of second chargebacks for a merchant to lose confidence in the process. The merchant works hard to provide a valid case and the would-be successful dispute is challenged again.
Unfortunately, there is a limit to what in-house management teams are capable of. Without processional assistance from individuals who know how to successfully navigate the system, it’s challenging to secure a high net win rate.
However, that’s not to say it is impossible to avoid second chargebacks. It is possible—here’s the secret.
Do it right the first time.
Create a compelling case the first time around. Without a doubt, prove that friendly fraud has transpired and second chargebacks can be avoided.
Obviously, for most merchants, this is one of those things that is easier said than done. However, at Chargebacks911™, it really is easy. Contact us today. We’ll tell you about the success we’ve had preventing second chargebacks and improving merchants’ overall net win rate.
Myth #5: It’s impossible to dispute chargebacks for digital purchases.
Because digital purchases deal with intangible goods, it can be a bit trickier to dispute chargebacks for these products.
If done correctly, disputing chargebacks for digital purchases will not only help recover revenue, but also provide valuable intelligence that can improve fraud rules to increase subscription retention. Using our Intelligent Source Detection to target friendly fraud, a digital merchant is able to correct bad habits of otherwise good customers.
First, merchants need a solid foundation of business best practices. This allows sellers to reduce their initial risk and create more compelling dispute cases. For example, merchants should:
- Draft clear, fair and reasonable terms of service. Using an electronic signature is recommended.
- Verify the cardholder’s identity to ensure that the person ordering the product is not a criminal fraudster.
- Put activation keys in the cloud. This way, there is a record of when the customer redeemed the product key.
Second, merchants need to dispute with confidence.
If merchants have done all they can to prevent the preventable chargebacks, meaning merchant error and criminal fraud have been eradicated, the only task left is to dispute chargebacks stemming from friendly fraud. The odds of success for digital goods are no different than any other product or service.
Myth #6: Once I have a system in place, I can just replicate it for all of my chargeback disputes.
No two chargebacks are ever the same. That’s why static solutions can’t be used to manage this dynamic threat.
Cookie-cutter strategies, like those commonly provided by automated tools, can actually do more harm than good because they increase the odds of errors and the submission of incomplete disputes. Submitting sub-par representment documentation can damage a merchant’s reputation just as much as failing to dispute in the first place.
That’s why effective chargeback management demands a custom approach rather than one-size-fits-all formulas.
Chargebacks911™ is the only service provider to incorporate the human element. We create customized disputes that effectively prove the validity of the original transaction and reverse the chargeback. Our human forensics are capable of identifying the true source of the chargeback and creating a response that fits that individual cardholder’s claim.
Taking each dispute through an 8-step submission process ensures a higher level of success. Contact Chargebacks911 today to learn more about this unique chargeback dispute philosophy.
Myth #7: If the service provider’s win rate is higher than the industry average, it must be a scam.
In-house chargeback management teams can expect to win anywhere from 10 to 20% of their chargeback disputes. In-house tactics, with limited resources and experience, are capable of addressing the low-hanging fruit—the easy-to-win chargeback disputes.
Chargebacks911™ uses those same elementary tactics and then applies an additional layer of expertise. Our industry connections and patented technologies give us a considerable edge over the limited capabilities of an in-house team. Additionally, our myopic obsession with chargeback management means we are able to identify and implement cutting-edge, dynamic solutions to address threats before they become a liability.
Our proprietary research has revealed that as much as 85% of chargebacks are cases of friendly fraud. Since Chargebacks911™ alone is able to definitively identify friendly fraud through the use of our Intelligent Source Detection, it’s easy to see how much, much more than just 21% of chargebacks can be won—and won with skill and technology, not cheating or deception.
Myth #8: All chargeback representment services are the same.
By dispelling several other chargeback dispute myths, we’ve already pointed out that not all service providers are the same. Some fail to recover a noticeable percentage of revenue while others could actually damage the merchant’s reputation.
If you needed even more evidence of the different service options available on the market today, take a look at this detailed ‘us vs. them’ analysis.
|Dual-layer quality control||No reputation repair|
|Inherent review process with human forensics||Error-prone automation|
|Intelligent Source Detection||Inability to identify true chargeback triggers|
|Developed per industry||One-size-fits-all approach|
|Merchant intelligence||Bank allegiance|
|Unlimited scalability||High-cost, limited scaling options|
|Densest OMS, gateway, and processor integration||Only associated with top banks|
|Global services||Domestic only|
|Performance-based payment options||Limited flexibility|
|Guaranteed ROI||Limited accountability|
|Machine Learning and proprietary technology||Static, single-layer solutions|
Fight for Truth!
While there are plenty of half-truths and misunderstandings about chargebacks, friendly fraud is no tall tale.
If you’ve been deceived by any of these myths, now is the time to take action. No matter what you may have been led to believe, it is possible to dispute chargebacks—and win!
Contact Chargebacks911™ today to learn about our comprehensive, tactical solutions that decrease costs, reduce risk, and ensure sustainable, long-term growth.