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How to Create a Chargeback Reduction Plan

Jessica Velasco | Friday, February 16th, 2024 | 8 minutes

A chargeback reduction plan can help you identify and implement the best strategies to prevent transaction disputes.

Here’s how to simplify the plan’s creation and ensure the management strategy is effective.


What is a Chargeback Reduction Plan?

A chargeback reduction plan, sometimes referred to as a dispute remediation plan, is a formal document the card networks request after merchants enter a chargeback monitoring program.

Each card network uses these programs as a sort of probation when a chargeback rate becomes excessive. If risk continues to increase, payment processing privileges could be revoked.

But before closing accounts, most acquirers will first give merchants the chance to try to get their chargebacks under control. Merchants will be asked to complete a chargeback reduction plan that will hopefully help identify and solve the problems that are causing transaction disputes.

If your acquirer asks for a chargeback reduction plan, consider yourself lucky! You have the chance to fix any mistakes and improve your business. Use the opportunity wisely.


How Do I Create a Chargeback Reduction Plan?

Don’t just think of your chargeback reduction plan as administrative busywork.

Use this opportunity to really examine the current state of your business, recognize the direction you want the business to go in, and determine the best way to meet your objectives. Be realistic about what has happened and what could happen.

When you are ready to put pen to paper, your chargeback reduction plan should consist of six sections.

1. Share general business information.

Start by sharing general information about your business.

Provide details about the products or services you sell, your marketing tactics, your billing method, card not present policies, etc.

Your acquirer might use this information to provide tips and strategies that have worked for other businesses with your same characteristics.

2. Explain the reason for excessive chargebacks.

Provide a thorough explanation of what caused your business to receive an excessive amount of chargebacks. What is the root cause of the issue?

For example, did you discover one of your marketing sources was engaging low-quality customers? Was there an error in the fulfillment department? A point of sale or machine learning error?

3. List the tools and processes you currently use.

Make a list of all the tools for handling fraudulent transactions and chargeback prevention you are currently using.

For example, your list might include tools like:

  • Address Verification Service (AVS)
  • Card security code (CVV2, CVC, etc.)
  • 3D Secure (Verified by Visa, Mastercard SecureCode, etc.)
  • Order validation
  • Prevention alerts
  • RDR

List the date you started using each tool and the criteria or parameters for their use.

4. List the new tools and processes you will implement.

Make a list of any new or different tools you will use to help prevent chargebacks. Also, note any modifications you will make to your existing strategy. Modifications might include things like:

  • Automating prevention alert management
  • Hiring more customer service representatives for a better customer experience
  • Changing your return policy

List the date you will make the changes, the criteria or parameters for each strategy, and the anticipated impact on your overall chargeback management results.

When you’ve decided which strategies and technologies you’d like to try, Kount can help you put your plan into action. Sign up for a demo, and our team will show you how to achieve the best results possible.

5. Outline your strategy for monitoring results and follow up.

Explain how you will monitor the success of your newly implemented chargeback reduction plan, including the date of your next scheduled review.

If your plan doesn’t seem to be effective, you may be asked to try new tactics. If you’ve been monitoring your outcomes, you’ll have a better idea of what is and isn’t working. You’ll know which tactics you should keep and which should be replaced with something new.

6. Include supporting documentation.

When you submit your chargeback reduction plan, attach documents that support your claims. These documents will help explain the reasoning for the decisions you made and establish trust in your plan.

Examples of documents you might want to provide include:

  • Documents that prove you use the same DBA (doing business as) name for all customer interactions (website, order confirmation email, billing descriptor, etc.)
  • A copy of your cancellation plan
  • A copy of your terms and conditions
  • Copies of emails you send to customers (order confirmation, upcoming billing notice for recurring transactions, refund confirmation, etc.)
  • Response templates for communicating with an issuing bank or responding to credit card statements
  • Documents that help explain the reason for excessive chargebacks (charts, graphs, team correspondences, etc.)

Want Help Creating Your Chargeback Reduction Plan?

Kount removes the complexity of payment disputes. Reach out today to learn more about a proven-effective chargeback prevention strategy.

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AUTHOR

Jessica Velasco

Content Manager for Marketing

For nearly a decade, Jessica Velasco has been a thought leader in the payment dispute industry. She aims to provide readers with valuable, easy-to-understand resources.

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