3 chargeback prevention myths that are costing your business
In so many ways, chargebacks are just a part of doing business. Business owners and merchants can do everything right and still get chargebacks, especially when the events that lead to them are out of their control.
For example, interrupted supply chains can make it hard to source materials. Adverse weather conditions can push back shipping and delivery. And labor shortages can delay order fulfillment.
Chargebacks aren’t always the merchant’s fault. So it’s easy to forget that even chargebacks from uncontrollable circumstances are preventable. Kount’s “Digital Payments in 2021” survey revealed some key chargeback and dispute management statistics — specifically, why businesses don’t engage in the dispute process.
If yours is among the businesses that don’t dispute chargebacks, you could be losing revenue to these common chargeback prevention myths.
1. You don’t have enough chargebacks to justify dispute management
Among businesses that don’t dispute chargebacks, 28% claimed they don’t have enough chargebacks to justify the dispute process. But among all survey respondents, 58% said their chargeback rate has increased since March 2020. And almost half of respondents said their current chargeback rate is between 0.6% and 1%. Exactly a third said their chargeback rate is at least 1.1%.
The data suggests that most respondents are at high risk for placement in a fraud or dispute monitoring program — if they’re not in one already. So a business might believe it doesn’t get enough chargebacks to worry about the dispute process. But it wouldn’t take many more to put them in a costly position.
“This might have been true for some merchants in the past,” explained Brady Harrison, a Kount Senior Data Analyst. “But today, fighting any number of chargebacks isn’t just financially lucrative. It’s effective in preventing future chargebacks too.”
2. You have to wait for a customer dispute to become a chargeback before you can do something about it
Among businesses that don’t dispute chargebacks, 36% claimed they don’t win representments enough to justify the dispute process. There’s no doubt that the representment process can be long and tedious. But Kount experts speculate that these businesses may be waiting too long to start the process — let alone win.
Let’s look at one of those seemingly uncontrollable situations. For example, let’s say a business just shipped popular orders to areas experiencing adverse weather. Because the business knows the weather will delay these deliveries, it can take extra steps to inform customers.
Maybe that’s using social media to assure customers packages are coming, updating tracking information frequently, or launching a campaign to discount future purchases for customers affected most. The important thing is not to wait until a customer dispute becomes a chargeback before doing something about it.
“If you have sufficient belief that a transaction is likely to become a dispute, offering a proactive refund can effectively prevent a chargeback from being issued,” Harrison explained. “In addition, some dispute and chargeback management tools can add friction at the dispute level, which can further deflect a chargeback.”
Now, let’s look at something a little more complicated. Say a customer doesn’t recognize a transaction and disputes it with their bank or credit card company. If the business has post-authorization chargeback tools, in some cases, it will know about the dispute immediately. And it can use the tool to relay more information about the transaction to the bank and the customer automatically, deflecting the dispute before it becomes a chargeback.
3. Chargeback and fraud prevention tools are hard to integrate
Finally, among businesses that don’t dispute chargebacks, 24% claimed they don’t have the resources to justify the dispute process. Unfortunately, this might be the most damaging myth of them all.
“Collaboration between banks and issuers have made chargeback protection and prevention tools easier than ever to implement, with minimal to no integration on the merchant side,” Harrison said. “On the fraud tool side, rapidly growing partnerships between service providers and processors — think, Magento and Salesforce — have made integration easy. Some businesses can access robust fraud protection in less than a day.”
These days, businesses don’t need extensive technology or fraud knowledge to use a chargeback prevention tool. The right integrations are easy to navigate, so even the newest team members can train quickly. And once a business has the right tools in place, it can respond to disputes quickly and, in some cases, automatically refund purchases to prevent chargebacks.
Don’t let chargeback prevention myths hold you back
If you already prevent fraudulent transactions, the next best way to avoid chargebacks is to stop them at the dispute level. Kount’s Dispute and Chargeback Management solution is a simple integration that gives businesses access to a dashboard to manage all their chargebacks.
Plus, Kount’s solution uses post-authorization tools from major card brands. It works with Verifi, A Visa Solution, Mastercard’s Ethoca offering, and Kount’s own Identity Trust Global Network.™ These capabilities combined can help businesses act on customer dispute inquiries and chargeback alerts as soon as they happen.