6 Must-Haves When Outsourcing Chargeback Solutions
The cost of a single chargeback might seem negligible, but when a business experiences a high volume of these disputes, they add up quickly. Besides, there's more than just the original price of the good or service to consider—chargebacks also result in costs like fees to payment processors and lost money from delivery and marketing. All these costs add up more than most businesses realize, with a chargeback often costing double the price of the product or service itself.
This should be enough to worry about, but firms face an even bigger problem: receiving too many disputes can result in banks closing merchant accounts, making it practically impossible for businesses to continue their operations. All it takes to run the risk of being blacklisted is for 1% or more of an account's transactions to result in chargebacks, which leads to card networks or payment processors placing the account holder on their Terminated Merchant File or MATCH list. While the effects aren't permanent, it usually takes five years to recover.
Although it's true that companies can't completely eliminate the risk of chargebacks, they can certainly minimize their risk exposure. Simply staying on top of disputes as they occur and having a strategy to tackle them where possible can make a huge difference. It's a lengthy and difficult process, but well worth the effort considering what's at stake—besides, companies can reduce the admin involved by using chargeback solutions.
Wondering what exactly is available and how to make the most of the tools out there? Below is a detailed guide containing everything there is to know on the topic.
Originally, legislators brought in chargebacks to stop businesses from being able to exploit their customers by delivering poor-quality goods and services—or failing to deliver anything at all. However, pro-consumer legislation is now so comprehensive that some say the pendulum has swung too far in the opposite direction: it's now easy for dishonest consumers to take advantage of retailers that haven't done anything wrong.
The good news? Retailers can take steps to protect themselves. One of the main options is representment: a legal process through which firms can defend themselves from unfair disputes. This is only possible with strong evidence, but it's generally recommended in the case of friendly fraud or disputes for high-ticket items. In other cases, it might be better to offer customers a cancellation in return for them withdrawing their dispute, which gives them their desired outcome (their money back) while causing less hassle for the retailer.
Yet the best course of action is to stop customers from filing chargebacks in the first place—options are limited once the dispute has already gone ahead. Third parties, such as Ethoca and Verifi (or resellers of these products), offer various tools to help merchants do exactly this. For instance, real-time alerts when a chargeback is initially filed gives retailers a chance to organize an official cancellation with the customer, saving time, money, and a negative record with the processor.
Even if a merchant opts for real-time alerts for chargebacks or uses tools that aid deflection, it's impossible to be proactive about disputes without employees constantly monitoring and acting on data. It might sound simple enough, but this requires valuable working hours spent logging into multiple accounts and portals to find the right data, then tracing it back to the relevant transactions. It's rarely an efficient use of resources, and is a dull task for anyone involved.
Merchants can make the process easier for themselves by using a management dashboard that allows them to access everything they need in one place. Save time and allocate valuable resources elsewhere.
These dashboards may integrate with a retailer's payment processor, CRM, and other software via API. The features available vary slightly between different dashboards, but they usually offer instant access to current disputes and chargeback thresholds, plus the option to effortlessly process chargeback alerts and handle representments.
As mentioned already, if a retailer's transactions result in an excessive number of chargebacks, it could lead to a bank closing the account or even blacklisting the merchant altogether. This spells serious trouble. One way to avoid such a catastrophic situation is through constantly monitoring and analyzing the data to ensure that chargeback rates don’t sneak up unnoticed—and figuring out the root causes if it does.
Without using any additional tools, this type of analysis is an extremely time-consuming and complex process. Fortunately, chargeback tools can save endless hours of hassle by automating tasks and presenting a retailer with all the information they need instantly. This way, a team can figure out where the problems lie quickly and easily, and most importantly, prevent the same thing from happening again.
Every business leader knows that data is an essential tool for understanding a company's position and the greatest challenges it faces. But when it comes to chargebacks, figures are only useful when they're up-to-date. Don't wait until the end of the month for chargeback reports—check the latest information as often as possible. Preferably every day.
This might be difficult to achieve when pulling the data manually, but it's easy enough with a tool that checks all the information automatically. A good chargeback solution can check the health of a merchant account (or MID) and turn raw data into a sophisticated analysis. No more stressful hours for employees as they try to do everything themselves.
Besides, anyone who has tried to work with chargeback data before will know that trawling the various alerts, refunds, and rates is just the beginning—most companies also want to create reports that can be easily understood and shared within the company.
Merchant Account Protection
A retailer that isn't taking steps to prevent itself from getting blacklisted or dropped by its bank or payment processor is one that's walking a dangerous line. Unless a merchant has a way of checking its current chargeback rate regularly, it won't be able to take action when and if that rate becomes too high.
This is particularly complicated for merchants that are managing various brands or stores. Chargeback software can really make a difference here—instead of having to log onto multiple accounts and platforms for each subsidiary, merchants can access them from a single interface, complete with all the details and information they need.
Having limited resources is a huge hurdle for companies that have to carry out every little job themselves, but being able to access everything important on a single centralized platform takes the bulk of the weight off. A chargeback solution with integrations performs multiple functions: it lets a merchant access customer data from its CRM, transaction data from its payment processor or gateway, and just about anything else imaginable. All this is achieved with a simple API integration.
Data from a payment processor or bank is generally the primary source for chargeback data; it's the most reliable and contains the information most retailers need regarding their account's health. However, customer data from the CRM may also be useful for updating customer records and enabling the quick resolution of any disputes; it can also provide a kind of backup for when information from the payment processor is inaccessible.
Finally, a gateway usually includes transaction detail data such as BINs, refunds, transaction amounts, and more, making it possible to see the wider picture of how healthy a retailer’s business operations are.
The Right Chargeback Solutions for Your Business
Resolving chargebacks can be a tough process for merchants to navigate. Fighting them means knowing which ones you can fight and how to fight them, and then overseeing that whole process from start to finish. To prevent them from happening in the first place, you have to know why you're getting them, and that means analyzing large amounts of chargeback data.
Very few merchants have the time or resources to become chargeback defense experts on top of doing everything else they need to do to stay competitive in today's marketplace. That's where outsourcing chargeback services and having the right management software that can automatically and intelligently handle your chargeback-related tasks can be such a great help.
MidMetrics provides all of the essential chargeback solutions (outlined above)—along with a full suite of our own proprietary chargeback tools, including Management Dashboards, In-Depth Analytics, and On-Demand Reports. This gives you a comprehensive platform for fighting chargebacks and defending your merchant accounts, all for one price.
How much would it cost to cobble all these services together from different providers—and how effective would they be? MidMetrics is expertly designed to be easy to use, easy to integrate with your existing systems, and robust enough to provide actionable insights for every merchant's chargeback situation.