Payment Dispute ResolutionSometimes, Trying to Make Things Right is Ultimately the Wrong Answer

The Ins & Outs of Payment Dispute Resolution: What Merchants Might Be Missing

Everyone knows you can’t please all the people, all the time.

As a merchant, that means you’ll definitely end up dealing with disputes at some point. No matter how careful you are, there will inevitably be buyers who’ll claim you did something wrong. Sometimes those disputes arise due to a genuine mistake on your part. Other times, you’ll need to respond to the buyer’s claim in order to resolve the dispute fairly and hold on to revenue that is rightfully yours. Each response will mean extra work and extra cost for you, though, regardless of who’s ultimately right.

In this post, we’re looking at the dispute resolution process. We’ll cover how the process works, why it matters, the best ways to address disputes, and what you can do to protect your revenue in the long term.

What is Payment Dispute Resolution?

Payment Dispute Resolution

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Payment dispute resolution is the process of handling a disagreement with a buyer regarding a charge. This could result from alleged fraud, or a mistake made on your part that negatively affects the buyer.

Regardless of how they start, you need to get all disputes resolved quickly, with as little cost and inconvenience as possible. Your reputation could be on the line here.

Righting wrongs speedily is a good way to build customer trust. As a bonus, it will lower the odds of negative reviews. Most importantly, it can also ensure that the customer’s claim doesn’t escalate to a full chargeback. 

If that does happen, though, you may still have a chance to contest the chargeback through representment, which we’ll discuss a little later. For now, just remember that customers have the right to dispute credit and debit card charges, and that you have the right to respond and try to resolve the issue.

The Payment Dispute Resolution Process

Of course, knowing that dispute resolution is important doesn’t tell you how to go about it. So, let’s walk through the dispute resolution process and get an idea of the steps involved.

When a cardholder decides to dispute a charge, the cardholder’s bank will notify your processor, who’ll forward the notification to you. You can then choose to accept the dispute claim, or to fight it. While all cases are different, the steps typically go something like this:

• 1. Notification: You’re alerted by payment processor that a customer has filed a dispute.
• 2. Decision: You examine the claim, pulling up relevant records of the transaction in question. If it seems legit, then accept the claim. If not, proceed to the next step.
• 3. Examination: Note the reason code and the time limit for response, as well as what types of documentation would be needed as evidence.
• 4. Compilation: Collect and prepare as much evidence as possible. You’ll also need to prepare supporting documentation, like a rebuttal letter explaining the case.
• 5. Submission: Before the deadline, the rebuttal package is submitted to your payment processor or acquirer, who forwards it to the cardholder’s issuing bank.

It sounds fairly simple, but this is the abbreviated version. There are multiple twists and turns the claim can make. Things like gathering evidence and creating rebuttals can get complicated; even simple claims can take up time and resources better used elsewhere. 

Challenges in Payment Dispute Resolution

If dispute resolution were simply a case of “You’re right, I was wrong, let me fix that for you,” it would be easy. That may happen occasionally, but it’s rare. 

There are plenty of potential challenges that can complicate the process:

Why Payment Dispute Resolution Still Matters

All of the above can make disputing seem like a lot of work for nothing. Admittedly, a significant percentage of merchants don’t bother to fight at all, simply absorbing the loss as a cost of doing business. Knowing that you’ll only be able to get a portion of your revenue back, you’ll have to weigh the costs of contesting a dispute, and decide if the means justify the end. 

Before you make that call, though, you should know that there’s more at stake than the immediate transaction costs. While you may not get a high ROI on any specific dispute, ignoring invalid chargebacks will seriously impact your bottom line over time.

For example, a string of unchallenged chargebacks makes you look like a risk to banks and processors. This could lead to higher fees. It will make it harder to find a processor or acquirer who’s willing to work with you. There’s even the possibility of losing your ability to accept credit cards at all.

On the other hand, challenging bogus claims helps protect your chargeback ratio, and tells all parties that you won’t passively accept abuse of the system. Banks and cardholders will see you as more legitimate. Would-be fraudsters will see you’re not an easy target. That will ultimately lower your future chargeback volume.

Oh, and another long-term benefit? Data.

As we said, it can be challenging to get accurate case information for any given claim. Over time, however, representments can help you amass a larger collection of data to facilitate machine learning technology. The more information you have, the better you’ll be able to make data-driven fraud prevention strategies.

Cost-to-Benefit Analysis: When to Fight Payment Dispute Claims vs. When to Accept

Not every dispute warrants a fight. Smart merchants recognize that, in some cases, the best approach to payment dispute resolution is to simply accept a customer claim. This involves evaluating each case systematically, though, rather than applying a blanket strategy.

Before making decisions, factor in staff time for evidence gathering and documentation, payment processor representment fees, internal administrative overhead, and opportunity cost of resources diverted from revenue-generating activities. Many merchants discover their all-in cost per dispute ranges from $50-$150 depending on complexity. It’s not ideal, but if the transaction being disputed comes to $20, it may be more economical to just accept the claim.

Assess what documentation you have available before committing any resources. Strong evidence includes delivery confirmation with signature, customer communication acknowledging receipt, proof of authorization through 3-D Secure or similar authentication, and clear terms of service acceptance records. Weak evidence, like tracking numbers without delivery confirmation or unsigned proof of delivery, significantly reduces your odds of success.

If you have automated processes for compiling evidence, lower-value disputes become more economical to contest. Without automation, you may need to set minimum dispute values that justify the costs associated with manual evidence compilation. Typically, transaction amounts should exceed your per-case resolution cost, preferably by a considerable margin.

Performance Metrics: How to Track Payment Dispute Resolution Effectiveness

Measuring dispute resolution performance requires tracking specific key performance indicators (or “KPIs”). These will show both immediate outcomes and long-term trends affecting your business.

Of course, those are just a few of the crucial metrics you can track tied to dispute resolution. Additional critical metrics include dispute-to-transaction ratio by product category, repeat dispute rate from the same customers, and representment acceptance rate by card network.

Learn more about win rate KPIs

Review these metrics monthly to identify trends requiring strategy adjustments. Quarterly deep-dives comparing performance across payment processors, customer segments, and sales channels reveal optimization opportunities often hidden in aggregate data.

Technology Stack Requirements for Payment Dispute Resolution

Payment dispute resolution are gonna require integrated technology systems that automate evidence collection, streamline workflows, and provide actionable insights.

This is a bit different from your traditional tech workflow, where you can check off a list of tools to adopt as part of your tech stack. Instead, it’s better to think about key functions that need to be carried out, and how best to accomplish each one:

Dispute Data Management

Without centralization, you’ll waste hours managing separate portals and missing critical deadlines. You need a central hub, consolidating notifications from multiple payment processors into a single dashboard. Essential features that you’ll need include:

• Automated reason code identification
• Response deadline tracking
• Evidence template generation by dispute type
• Submission workflow management
• Alerts notifying you about pending disputes before they become chargebacks

Evidence Automation

You need the ability to capture and store transaction documentation in real-time; for instance, using your CRM. Necessary documentation to be able to instantly recall here includes (but is not limited to):

• Automatic capture of order confirmations
• Shipping notifications with tracking data
• Delivery confirmations and signatures
• Customer communication logs across all channels
• Fraud screening results with timestamps

Analytics & Reporting

You need a way to transform raw dispute data into strategic insights. Analysis of transaction data can reveal patterns across reason codes, products, customer segments, and seasonal trends that inform prevention strategies. Key data points include (but again, are not limited to):

• Reason codes, chargeback amounts, and chargeback timeframes
• Order value, customer activity, and transaction method
• Communication logs and delivery information
• Marketing channel and product category

How Chargebacks911 Simplifies Payment Dispute Resolution

Payment dispute resolution can tie up a significant amount of resources, and winning a reversal is never a guarantee. That’s why a growing number of savvy merchants are discovering that outsourcing dispute management to the right team can free up time and deliver a measurable increase in ROI. 

To be effective, a dispute management strategy must address both pre- and post-transaction issues. Chargebacks911 offers the most comprehensive, end-to-end dispute management platform available. As a proactive partner, we can help you implement chargeback prevention tools in as little as 24 hours.

Our AI-based, data-driven automation has been proven to recover more revenue otherwise lost to phony claims. We consistently win a higher percentage of total chargebacks, a fact that’s backed by the first performance-based ROI guarantee in the industry.

If you’re ready to reduce costs, recover revenue, and protect your long-term brand relationships, we need to talk.