3 post-authorization tools to help businesses avoid chargebacks
By their nature, all chargebacks happen after a customer (or bad actor) completes a transaction online. But the events that lead to chargebacks fraud — criminal and accidental friendly fraud — and legitimate disputes affect several parts of the customer journey. Businesses are susceptible to chargebacks before and after they authorize a transaction. And that can make avoiding chargebacks all the more challenging.
58% of eCommerce merchants said identifying friendly fraud was among their top three chargeback challenges, according to Kount’s 2018 “State of Chargebacks” report. Meanwhile, friendly fraud and merchant errors (or legitimate disputes) accounted for almost a third (31%) of merchants’ main sources of chargebacks. 47% said their primary source of chargebacks was criminal fraud.
An AI-driven digital fraud prevention solution can help businesses prevent chargebacks before they authorize a transaction. But preventing chargebacks that occur as a result of friendly fraud or a legitimate dispute require post-authorization tools. These tools can help businesses intercept disputes and automatically resolve them to avoid chargebacks.
Inquiries tell businesses when customers dispute charges
One of the most difficult parts about chargeback management is time. It takes too long for businesses to hear about a customer dispute. Often, by the time a business learns about a customer dispute, it’s too late for them to do anything about it. That’s where inquiries come in.
An inquiry removes the time delay from the process and tells businesses that a customer has questioned a charge almost immediately. As soon as a business receives an inquiry, it can collaborate with banks by sending additional information about the transaction. When a business can quickly — in some cases, automatically — relay transaction information to banks and customers, they can save sales and prevent chargebacks. Let’s take a closer look at how an inquiry can deflect a chargeback.
When a customer saw a $25 charge on their credit card statement that they didn’t recognize, they called their issuing bank. But because the business had an inquiry tool, it could automatically send transaction details to the bank. The bank relayed the transaction details to the customer, who remembered the charge. The business saved the $25 sale, avoided a chargeback and fees, and didn’t spend any additional time contesting the dispute.
5 benefits of an inquiry tool for chargeback prevention
- It allows banks to request and automatically receive additional transaction details.
- It can relay merchant names and logos, purchase location details, and itemized digital receipts.
- It can help customers recognize purchases faster.
- It can deflect chargebacks and prevent friendly fraud and policy abuse.
- It can reduce unnecessary disputes and costly chargebacks caused by transaction confusion.
Alerts tell businesses when a customer dispute becomes a chargeback
The delay in learning about a customer dispute makes it hard for businesses to act quickly. In many cases, disputes stem from legitimate problems. Maybe a customer receives the wrong item or a shipping delay prevents their order from arriving on time. When businesses know about a legitimate dispute in real time, they can act to prevent a chargeback and preserve the customer relationship. They might issue a refund, replace an item, or offer the customer a discount on their next purchase. Alerts can help them act fast.
Alerts tell businesses that a customer dispute has become a chargeback. Once the business gets an alert on an eligible transaction, they have between 24 and 72 hours to act. From there, they can automatically or manually issue a refund to avoid manual review time and prevent a chargeback. This course of action is especially useful for resolving legitimate disputes. And if the dispute is the result of fraudulent activity, the business can stop pending shipments to avoid inventory loss. Let’s take a closer look at how an alert can deflect a chargeback.
Through an alert, a business learns that a $25 charge will become a chargeback. The business now has between 24 and 72 hours to act. The business customized its policies to automatically refund purchases below a certain dollar amount. So the customer received a refund quickly, and the business resolved the dispute and avoided the chargeback and fees.
5 benefits of an alert tool for chargeback prevention
- Businesses can authorize seller-initiated refunds to prevent banks from escalating disputes to chargebacks.
- Businesses can apply auto-decisioning to resolve fraud and non-fraud disputes.
- Businesses can refund purchases and stop shipments to prevent inventory loss.
- Businesses can resolve disputes quickly, save time on manual reviews, and maintain positive customer relationships.
- Businesses can avoid dispute filing errors.
Notifications help businesses prevent future fraud and chargebacks
The more a business knows about why it receives chargebacks, the more it can do to prevent them. For example, customers may initiate legitimate disputes for many reasons. Maybe they didn’t receive what they ordered, received a product they weren’t expecting, couldn’t easily return a purchase for a refund, or had a bad experience with customer support. Having more data from major card brands can reveal which policies or practices a business needs to change to prevent chargebacks. And notifications can help.
Notifications tell a business that a chargeback is incoming. Though the business can’t avoid the chargeback, it can use notifications to stop shipments and prevent inventory loss. Businesses can also use this post-authorization tool to uncover trends and challenges in the customer journey and adjust fraud policies to prevent similar chargebacks. Notifications use advanced analytics and chargeback reason codes to help businesses understand the causes of chargebacks. Let’s take a closer look.
A business receives a notification that tells them a chargeback on a $25 purchase is incoming. Because the notification includes additional information about the chargeback, the business knows the customer received the wrong item in their package. The business can use this information to investigate operational issues that may be affecting other orders. With this information, the business wouldn’t know enough about the customer’s problem to correct it.
5 benefits of a notifications tool for chargeback prevention
- Businesses can receive data for all confirmed fraud and chargeback notifications in real time.
- Businesses can combine issuer data with purchase data, geolocation data, shipping information, and device information to uncover dispute trends.
- Businesses can track and improve fraud rates based on chargeback patterns.
- Businesses can adjust fraud policies to prevent similar chargebacks.
- Businesses can improve customer experiences and increase revenue.
Stop chargebacks, save the sale
The best way to eliminate chargebacks across the customer journey is to use a dispute and chargeback management solution that can help you identify friendly fraud and resolve legitimate disputes. The right tool may include chargeback alerts from major card brands that notify businesses when customers initiate disputes. When a business can intervene on disputes, they can refund purchases to avoid chargeback fees.
Kount’s Dispute and Chargeback Management solution gives businesses a single dashboard to access post-authorization products from major card brands. Dispute and Chargeback Management integrates with Verifi, A Visa Solution, Ethoca, and Kount’s Identity Trust Global NetworkTM so that businesses can improve their overall fraud prevention strategies. From these integrated products, businesses can use inquiries, alerts, and notifications to prevent chargebacks and revenue loss from criminal fraud, friendly fraud, legitimate disputes.