Chargeback Remediation Strategies for Enterprise Retailers
Comprehensive chargeback remediation strategies are critical to protect revenues, manage resources, and achieve long-term success.
Chargebacks are a growing problem for enterprise retailers, eroding profits and consuming valuable resources. Comprehensive chargeback remediation strategies are critical to protect revenues, manage resources, and achieve long-term success.
What are Chargebacks?
A chargeback occurs when a customer files a refund request through their bank or card issuer, rather than following merchant return policies. The issuing bank refunds the money to the customer, and if the chargeback was filed without basis, it is up to the merchant to dispute the chargeback.
Chargebacks cost merchants $80 million annually; and every dollar lost to fraudulent chargebacks actually costs $3.13, once fees, fines, and dispute costs are added in. Without an effective chargeback remediation strategy, a retailer will suffer revenue loss and eroded customer relationships, putting their long-term success at risk.
Related reading: 3 Ecommerce Fraud Prevention Best Practices for Retailers
What is Chargeback Remediation?
Effective chargeback remediation requires more than a single point of control; the problem must be approached from several angles. A comprehensive strategy should involve several steps: identifying the reasons that chargebacks are occurring, managing chargebacks as they occur, and taking proactive steps to prevent them in the future.
An enterprise retailer will not know a chargeback has been filed until the funds have been removed from their accounts, making chargeback management a necessarily reactive process. When chargebacks occur, retailers must review them to determine whether they are justified, such as in the case of missed fraud, or whether they were not filed in good faith. This could happen for any number of service or item related complications.
Fraud chargebacks should be reviewed to determine whether it is actual fraud or friendly fraud perpetrated by a customer. The latter of which may necessitate an attempt to recover funds via representment.
Should a merchant decide to pursue representment of the transaction, they must gather forensic evidence to build a solid argument in their favor. This requires compiling ‘allowable compelling evidence’ – information that can be presented during the representment process that can best help a merchant win a dispute.
‘Compelling evidence’ may include proof of order, of card use, of verification data such as AVS or CVV, or other digital forensics as available.
A fraud prevention solution that includes data on a customer’s device, household devices, and IP addresses can help you gather digital forensics that can be used to fight chargebacks. To build a dispute process, a retailer should have the correct tools in place, to gather compelling evidence to offer at representment; a process to compile evidence in a clear, understandable format; and a communication strategy that works with the bank or card issuer representment process, for the best chance at success.
Finally, an enterprise retailer must look to prevent future chargebacks. This is a proactive tactic – the effort that is put into preventing chargebacks from taking place will be well rewarded by the resources that are saved tracking, fighting and disputing chargebacks after they occur.
Chargeback prevention policies and tactics include communicating returns policies and updating appropriate terms and conditions. If customers understand how to complete a return, they may be more likely to use your process instead of requesting a chargeback from their bank.
Responding quickly and effectively to customer complaints can also prevent a chargeback being filed, as it will circumvent those chargebacks that are made because a customer is frustrated with customer service. Documenting these interactions is critical, as is blocking repeat offenders. Studies1 have found that 40% of customers that file a successful chargeback once will file another within 60 days, and half will do it again after 90 days.
Related reading: Guide to Credit Card Chargeback Merchant Rights
Chargeback fraud is expected to cost merchants more than $25 billion in 20202. An effective chargeback remediation strategy can be the difference between success and failure for an enterprise retailer. However, chargeback remediation requires a multi-layered approach that incorporates both reactive and proactive strategies to manage existing chargebacks, dispute fraud, and prevent future occurrences.
Is your legacy fraud solution effective for chargeback remediation? Precognitive’s multi-layered approach includes device intelligence, to provide digital forensics for chargeback representment; as well as behavioral analytics to assess fraud risk, and a real-time decision engine that can prevent fraud at the point of transaction.
Contact Precognitive today, and learn more about how our solution can help you manage and prevent chargeback fraud.