When a customer disputes a charge, the issuing bank assumes the retailer is guilty until proven innocent. You’re left holding the bag as the bank debits your account and charges a fee for the chargeback.
Is this just a cost of doing business? It doesn’t have to be. You can fight back and prevent the pain chargebacks inflict on your business’ revenues and profits.
However, you first need to understand that you’re starting from behind in the race against chargebacks.
The Chargeback Lifecycle is Long and Leaves the Merchant in the Dark
Merchants are usually kept in the dark about a chargeback issue until very late in the process as noted below.
1. The issuer, a bank or institution that offers credit to the cardholder, credits the customer.
3. The card brand, such as Visa or MasterCard, processes the dispute.
4. The acquirer, the bank or financial institution that processes card payments for the merchant, receives the chargeback and resolves the issue or forwards it to the merchant.
5. The merchant either accepts the chargeback or decides whether to dispute and represent the chargeback, resubmitting the charge to the acquirer.
6. The acquirer then reviews the evidence from the merchant, and if they believe the merchant has addressed the chargeback, they represent the chargeback to the issuer. If the evidence supports the merchant, the issuer reposts it to the cardholder’s account. If not, they may request further information.
Finally, the cardholder receives the dispute resolution information and is either re-billed or credited for the item.
Too Many Cooks in the Kitchen
Because of the multi-step, multi-party process, merchants sometimes aren’t informed about chargebacks until 180 days or more after the sale. By the time you receive a dispute, it’s usually too late to stop an order delivery or to avoid a chargeback, resulting in lost merchandise and profits.
All these “cooks in the kitchen” trying to address the cardholders’ problem are effectively burning up hard-earned dollars from your bottom line.
Chargeback Notifications
One way to cut chargebacks and boost profits is to use chargeback notifications. Why? Because they put you ahead of the curve when a customer is challenging a charge. In addition, notifications enable you to relax overly restrictive fraud prevention measures which may lead to false positives, negatively impacting conversion, sales and profits.Why? Because they put you ahead of the curve when a customer is challenging a charge. In addition, notifications enable you to relax overly restrictive fraud prevention measures which may lead to false positives, negatively impacting conversion, sales and profits.
Chargeback notifications put you directly in touch with top banks. When a customer disputes a charge and goes directly to their bank, as they are likely to do, the bank immediately alerts you, providing you with the opportunity to resolve the issue before it becomes a chargeback.
Notifications get you off the sidelines and allow you to be part of the high-stakes chargeback game. You have a chance to resolve disputes on both friendly and fraudulent chargebacks in a timely fashion. As a result, you avoid costly fines, fees and penalties…and the potential loss of your processing privileges.
Verifi offers a free chargeback analysis, which allows you to see how you can reduce chargebacks and increase your revenues and profits.
Frank Stornello is Chief Marketing and Strategy Officer of Verifi, a leading provider of global electronic payment and risk management solutions since 2005. Frank has over 25 years’ marketing and executive-level experience. Prior to joining Verifi, he was President of a large marketing services firm where he became one of Verifi’s first clients. Having experienced first-hand how a comprehensive fraud mitigation program improves profitability, he is passionate about helping other companies boost their bottom-line results.
