Chargeback Management

Chargeback Management Service

If you’ve ever lost revenue as a result of chargebacks, then you know how annoying it can be to recover it. It is important to review and analyze these situations so as not to have to deal with them again in the future. When you are able to recover funds properly and have better security, you begin to obtain consumer trust and that can lead to greater business from word of mouth as well as retention rates from returning customers.

Overall, there is a better experience for both you and your customers. The issue of chargebacks is very real for merchants thanks to several possibilities since no physical card is used. Some issues include hacking, fraud, as well as consumer abuse when systems like recurring payments are in practice. These issues threaten the integrity of one’s online business and if not taken care of as soon as possible, can lead to the business going completely bankrupt. Additionally, the time it takes to recover funds stolen can eat into the time it takes to do business, which is another casualty you might experience if you do not have a chargeback management service provider in place.

What is a Credit Card Chargeback?

A chargeback occurs when there is a forced transaction reversal initiated by a customer’s bank. They are put in place as a tool for consumer protection but are typically overused and can be an opening for fraud or other malicious behaviors. These reversals that come directly from the bank can, as you might well know, be wildly frustrating for merchants that can be a risk to one’s livelihood. Unlike a normal refund, chargebacks involve the customer asking the bank to remove money from the merchant’s bank account. The process goes like this:

  1. An investigation occurs to look into the issue.
  2. The bank feels like the request is reasonable.
  3. Funds are removed from the merchant’s account and returned to the customer.

Sounds like a nightmare, correct? Get this, even if the customer falsely accuses the business, they still do not have to return the product or reimburse the service. The blame and the payment solely fall to the feet of the vendor. Unfortunately, merchants are given a little warning and typically only find out once the funds have already been taken out. This leads the chargeback to have a natural consumer bias because the nature of the chargeback itself is designed to make the cardholder feel safe.

Chargeback Prevention for Merchant Processors

So now that you know your enemy, it is time to fight back! But how do you do this? By partnering with a provider that can offer chargeback protection services. The simple truth is that every chargeback is different and depends on the nature of the business. Depending on how high your risk level as a business is will determine how much the bank charges you during a chargeback cycle. Let us look at the different risk levels to see how business at each level can deal with the chargeback. Pay attention to the description of the business to see if it applies to your own business.

Low-Risk Business

These are merchants that get handed a physical card and process the payment at the physical location. A simple transaction has happened and there is a definitive ending, unlike a continuous service charge. To prevent fraudulent transactions at this level, merchants can use secure technology and provide excellent customer service.

Medium-Risk Business

Online retailers and e-commerce companies can offer around the clock customer service and make sure their business name appears clearly on billing statements.

High-Risk Business

These are the businesses that use recurring payments and subscriptions as their main business model. In businesses at this level, the best thing one can do is invest in a fraud protection service that has their back. How does this work? The merchant can set up an alert system that will give your financial team the time needed to address the issue with the bank before the money is taken out in the first place. Additionally, a chargeback prevention service can analyze your history of chargebacks and can determine the root cause of the chargebacks. Some common reasons a customer would file a chargeback could result from a canceled subscription, a duplicate payment, not receiving a product, dissatisfaction with a product, and the credit not being processed in the first place.

Why Would A Customer File A Chargeback?

Chargebacks can have a variety of reasons and that is why, if you are a higher-risk business, you should have a chargeback protection service in place to analyze why you received one. Some common reasons a customer would file a chargeback in the first place could result from a canceled subscription, a duplicate payment, not receiving a product, dissatisfaction with a product, and the credit not being processed in the first place. There are, however, more nefarious reasons why you may find yourself in the crosshairs of a chargeback. These would include fraudulent activity and may show up as fraudulent, unrecognized, or “general” reasons.

A chargeback protection service can help you identify these reasons through analysis tools so you can rest easy knowing what the issue is.

Chargebacks can be quite a frustrating part of running a subscription and recurring payment business model. You need to arm yourself with the protection a chargeback prevention service can offer. Contact us today to learn more.

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