It’s no secret that chargebacks are not sustainable, and they have a massive impact on merchants. Acquiring bank fees and other costs can balloon the cost of chargebacks to three times as much as the transaction amount. Merchants can lose up to 40% of their revenue if they don’t control their number of chargebacks. While some might argue that these chargebacks are simply an unavoidable cost of doing business, the numbers don’t back this up.
Chargebacks don’t just affect your bottom line. They can put the very tools you use to do business at risk if you end up on the card networks MATCH or Terminated Merchant File blacklist preventing you from opening up new MIDs for five years.
The truth is chargebacks can’t be ignored. Merchants who realize the toll these financial losses can take on their business know that they must be appropriately managed. Absorbing them isn’t an option. Chargeback management is essential to succeed in today’s payment environments.
The only question is, how do you manage chargebacks properly? It takes time, which isn’t something merchants have in excess. It also takes expertise and hard work, which is in limited supply for businesses these days. Specifically, it involves a lot of data analysis, problem-solving, and thought-out solution implementation. All of this can be overwhelming unless you have a team of chargeback experts and integrated software to manage it.
If you’re unsure about your ability to handle chargebacks, weigh the pros and cons of outsourcing it to a chargeback company, or keeping it in-house, here are some considerations to follow.
In-House Considerations
First, let’s discuss bringing a team in-house to handle chargeback management. The in-house option is popular for many merchants—especially new and growing ones—as chargebacks are often manageable at first.
With business growth comes more opportunities for chargeback problems. Scaling chargeback management is a process, and the number of chargebacks can quickly grow out of control as the business matures and grows.
If you’re considering bringing a chargeback management team in-house, here are a few things to be mindful of:
-
Security: Specifically, data security. Important customer and operational data can be more secure when you have an in-house team handling it instead of a third party. It’s less susceptible to unknown access that way.
-
Reliability: In-house teams are more affected by variables associated with your staff, such as vacations, layoffs, furloughs, etc. Sales patterns might be cyclical, so there may be fewer chargebacks during a particular season.
-
Sentimentality: Are you only keeping chargeback management in-house because of the emotional factor? You may be hesitant to outsource because you’re not sure it can be done better than the individual (or team) currently doing it. Or, you don’t want to get rid of specific tools or software you’ve grown to love. It’s a difficult decision either way.
-
Process: How much do you know about your chargebacks with your current process? Are you disputing any? What is your win rate? What are the granular details about the financial impact chargebacks are making on your business? These are all critical considerations. You need to get an accurate look at your chargebacks, which may be beyond the capabilities of an in-house team on its own.
-
Cost: Finally, the most crucial factor may be your budget. An in-house staff may appear cheaper than outsourcing when you first look at the numbers; however, you should consider training, tools, and resources. Furthermore, the more time your team spends on chargeback management, the less time they’ll have for other important tasks.
Outsource Considerations
Now, let’s discuss outsourcing. It can be the more expensive option, but that doesn’t mean it isn’t worth it. By getting your chargebacks under control with a reputable company, your savings might exceed any additional costs you incur for outsourcing your chargeback management.
The key is to hire a qualified chargeback company that is worth the investment. Here are some things to keep in mind when deciding on whether to outsource your chargeback management:
-
Expertise: Chargeback management is complex and ever-changing. It not only requires knowledge; it requires expertise in the industry, chargeback rules, regulations, and potential complications.
-
Stability: When you outsource your chargeback management, you’ll never have to worry about lapses in coverage due to vacations or other absences typically associated with in-house staff members. The best companies will provide management, prevention, and representation within the proper timeframes.
-
Tools/Software: Managing chargebacks requires the latest software and tools that provide you with insights, tracking, and dispute management for your specific industry. The right outsourced company will have the latest tools/software that can integrate with your systems.
-
Effectiveness: You can’t measure what you aren’t tracking. An experienced chargeback management company will know how to collect valuable data that helps you understand the underlying causes of your chargeback, potential solutions to remedy them, and how much revenue you’re recovering. All of this helps with better decision-making.
-
Strategy: Finally, you’ll enjoy a third party’s perspective that can offer valuable strategic insights for everything from discovering causes for chargeback problems to fighting fraudulent chargebacks and preventing them from happening in the first place.
The Right Chargeback Company for You
As you can see, there are quite a few factors to think about when deciding whether to hire a chargeback company or keep it in-house. These factors are especially pertinent when considering that your industry, your business, and your chargebacks are all unique. On the one hand, an in-house chargeback management team is more affordable. On the other hand, an outsourced team will have the expertise, tools, software, and reliability needed to ensure your chargebacks are managed appropriately.
One thing is for sure: chargebacks shouldn’t be taken lightly. To manage them effectively, you need accurate data, easily understandable metrics, feasible prevention solutions, powerful tools, and a robust defense strategy. You want your chargeback rate to go down and your revenue numbers to go up. Making the right decision will give you the peace of mind you need to address other important areas of your business.
Manage your chargebacks better with our dashboards, get a closer look at analytics that matter with our in-depth tools, and create reports on-demand. The ultimate goal at MidMetrics is to give you practical, powerful tools for growing your business, reducing your number of chargebacks, and ensuring your merchant accounts are healthy.
Want to see MidMetrics in action? Book a demo with one of our chargeback specialists today.
Chargeback management is an essential business function in today's payment environments. Whether managing chargebacks in-house or outsourcing to a chargeback management firm, our latest guide, Chargeback Management Essentials for Growth & Sustainability, will provide some fundamental essentials for business growth and sustainability.
