Chargebacks are, at least for the foreseeable future, here to stay.
They’re a problem that only seems to get worse every year. The Covid-19 outbreak certainly didn’t help, as it drove shoppers online to carry out the purchases they would have made in person. It turns out that record online sales, combined with an ever-widening digital landscape, is the perfect breeding ground for chargebacks.
All is not lost, however. There is actually quite a lot which merchants can do to limit vulnerability to chargebacks. Even better, they have options to fight back and recover their cash. With the right tools and practices in place, anyone can become a representment pro.
Common Mistakes to Avoid When Fighting Chargebacks
Prevention, is always the preferred method of fighting chargebacks. Every cardholder dispute that can be resolved before a chargeback occurs is a victory for your business. Although, not every dispute can be avoided, no matter how efficient your practices are.
Customers have a tendency to abuse the chargeback process. This is a practice commonly known as friendly fraud, which I’ve written about extensively.
In these instances, it’s necessary to fight back…but where does one start? How can merchants successfully navigate the representment process and win?
To get started, let’s take a look at what isn’t working. There are four common ways in which you can unintentionally complicate the process: bad communication, lack of understanding, lack of planning, and simply ignoring chargebacks.
#1. Failing to Communicate With Customers
Not every chargeback is malicious. In fact, customers file disputes for a variety of reasons, from unrecognized charges to failed returns. In many of these cases, solid customer service could have prevented the dispute altogether. Failing that, it may still help to resolve the issue before the bank approves the chargeback.
Do:
- Build and maintain trust with your customers by making yourself available at every stage along the buyer’s journey. Great customer service can be the key to lower chargeback averages.
- Keep Records. Transaction data, fulfillment data, customer profiles and verification data: all of these are pertinent details that you will need to successfully navigate the representment process.
#2. Misunderstanding the Process
There is a difference between the acquiring bank and the issuing bank, for example. Knowing this, as well as which one is handling the dispute, is key. Also, it’s important to understand how much time it could take for the bank to review your representment package and be clear about what they require, down to the number of pages.
Do:
- Your homework. Make sure you comb through every bit of information you can get your hands on to fully grasp and appreciate the process, so that you can plan accordingly.
- Keep up with rule changes. Be aware that each card provider has their own set of codes and resolution processes. It’s your responsibility to keep track of them all.
- Know the reason codes. Every chargeback you receive has a corresponding reason code attached that explains why the chargeback was filed, and details any evidence required to dispute the claim. Friendly fraud renders the unreliable, but they’re still important indicators.
#3. Lacking a Plan
There’s an old adage which goes: failing to plan is planing to fail. You should prepare your business for as many eventualities as possible. This applies to chargeback management as well. You have to create an adaptable, step-by-step plan to appropriately respond to chargebacks from before the initial dispute through representment.
Do:
- Look ahead. Take your plan a step further by drafting templates that correspond with each reason code. Templates can help you remain on target without bogging yourself down with unnecessary details.
- Ensure all your employees understand the procedures. Chargeback management is very complicated, so provide regular education and information updates to all employees.
#4. Ignore Chargebacks
We get it, chargebacks are a huge headache. No one wants to deal with them. But, if you are a merchant who sells digital goods… odds are you’re already experiencing plenty already.
Chargebacks are costing you money, whether you fight back or not. The average dispute will ultimately cost you more than three times the value of the original transaction. You might not win every dispute that you file, but you will certainly lose every one that you don’t.
While it’s true that not every chargeback that comes your way is illegitimate, ignoring any of them is a bad idea.
Do:
- Take valid chargebacks as a learning opportunity. Vulnerabilities happen. The great thing about them is that they can be corrected and help improve your business practices over time if you’re willing to learn from your mistakes.
- Be proactive about friendly fraud. Opting not to fight when you should will only cause more headaches in the long-term. As mentioned in the beginning, chargebacks are increasing in frequency and cost. Do your business a favor, and fight back.
- Have a combat strategy that you can integrate with your chargeback management plan. A savvy merchant might have a ready response for each reason code.
How to Fight and Win Against Chargebacks
I touched on four common mistakes that merchants make regarding chargeback management. Next, consider these three little “bonus” tips to help ensure the process goes as smoothly as possible:
- Pay Attention: Knowing the “who, what, when, and why” is invaluable to a successful chargeback representment plan. If you don’t understand all of the details, you can’t be including them in your dispute package. Get good at tracking and compiling data.
- Stay Informed: The payments industry changes constantly. New rules are introduced and implemented often, and it’s entirely up to you to be aware of—and respond to—these changes. For example, subscribing to blogs like this one or receiving industry newsletters can help you remain on top of the game.
- Know When You Need Help: If your business gets more than fifty chargebacks per month, odds are you need help. Whether that is achieved by hiring someone to manage these issues in-house, through CSM software, or by hiring a third party expert…you must take action to get the help you need.
