Tom-Chris Emewulu
Chief Disputes Analyst

The subject of chargebacks isn’t particularly new. However, industry data shows that their impact in today’s increasingly digitized marketplace is becoming a case of enormous concern.

Automated chargeback management saves you an excessive amount of time and resources.

Quite frankly, it’s the surest way of ensuring that your business is 100 percent protected from the uptick in fraudulent chargebacks.

Here are some numbers: Research shows that Account Takeover (ATO) fraud, popularly known as the 'fraudster's weapon of choice,' rose 282% between 2019 and 2020. Analysis by Feedzai’s Quarterly Financial Crime Report also indicates “a 60% rise in fraud rates and a 5.5% increase in the value of each attempted fraudulent transaction.”

And from all estimations of recorded online fraud, chargebacks and friendly fraud account for between 40% to 80% of all fraud losses. When you quantify that data in monetary terms, analysts say the revenue drain from chargebacks and its associated costs aggregates to nothing short of £80 billion yearly.

What is chargeback automation?

As the name implies, automated chargeback management is a comprehensive, pre-programmed chargeback solution that gathers and submits chargeback documentation without you lifting a finger. It’s a software solution that helps merchants respond to and mitigate chargeback effectively using analytical, case-based, and just-in-time principles.

But that’s not all. Chargeback automation helps you to quickly access a tremendous amount of data such as specific transactions, customers, payment methods, historical transaction patterns, and much more. The system also helps you tell the “open, won or lost,” status on each dispute. With that insight, you can know specific documentation to submit for representment, understand crime patterns, thwart them before they happen, increase your dispute win rate, and free up valuable time for productive work.

Who needs to use chargeback automation?

The argument that humans might do a better job than technology in understanding the intricacies of chargeback mediation is flawed. Yes, humans process chargebacks at the issuing banks and card schemes. However, automated chargeback management has proven to alleviate rookie errors that clutter the chargeback mitigation landscape.

So, who needs to use chargeback automation? The answer is every e-commerce entrepreneur that want to skip the mundane process and take their chargeback win rate to the next level! Chargeback automation costs at least 45% less than manual, in-house processes.

If you are still in doubt, below are some metrics to help you decide whether or not you should migrate to automated chargeback management.

  1. Do you get 10-20 disputes each month? If you get up to 20 disputes every month, that could mean several things. It’s either you’re green and don’t understand the rules of the game, the business model creates the opportunity for chargeback fraud, or you serve a region or an industry that is prone to chargebacks. For instance, industry analysis shows that if you are an international merchant or do business with any countries outside the U.S., Canada, the European Union, Japan, Australia, Singapore, or South Korea and deal in multiple currencies, you have a higher chargeback risk. And you should be using an automated dispute management system.
  2. Do you lose way too many disputes? For the majority of e-commerce entrepreneurs, chargebacks have become a cost of doing business. The reason is that even after going the extra mile to resolve a dispute, they still lose. And they bear the brunt of wasted time, a double tragedy of revenue loss and ancillary expenses. A chargeback automation service like Chargeflow will help you fix that by taking your win rate to 75% and giving you tons of data to stop any fraud attempt in its tracks. Those are the basics. The elegance comes with your ability to tell which transactions can turn into disputes and forecast your revenue with data from over 50 essential points! No company comes close.
  3. Do you waste too much time in fighting chargebacks? Want to know how long an average e-commerce merchant could spend each month fighting to recover $1,350? 17 hours at least! And how do I know that? Well, it’s simple math. Chargeflow, the world's first fully automated dispute and chargeback service, designed a drag-and-drop calculator to help you analyze that data and much more. Instead of working your fingers to the bone in the uphill battle of chargeback mitigation, automated chargeback management gives you the liberty to enjoy more free time to focus on building your brand, serving your customers, and building better products.
  4. Do you sell intangible merchandise? Per the service terms of most PSPs such as PayPal, in every instance that you do not provide proof of delivery for an item, the buyer wins the dispute. And as you’d guess, online shoplifters capitalize on that knowledge to get the best of merchants on items delivered virtually. But with chargeback automation, you don't have to worry about a thing. You can be sure that the data review options and fraud scoring techniques will catch trickier cases.

How do you automate chargebacks without breaking the bank?

As we stated in an earlier piece on this subject, there are three primary options for handling your chargebacks. And each one of those strategies comes with crucial merits and demerits. Let’s have a look.

First Option: Outsourcing your chargeback mitigation

Per the uphill battle involved in chargeback mediation, outsourcing your chargeback mitigation to a specialist vendor can be a helpful strategy. It can help you ensure that fraudulent cases aren’t slipping through the cracks, as the vendor will monitor and manage those chargebacks for you.

Here are merits:

  1. Your cases are in the hands of experts who understand the rudiments of the game better than you do. That can mean more cases won on your behalf.
  2. You get to save your workforce time and efforts that would’ve been spent on the uphill battle.

The demerits have to do with cost: You pay a little higher for that professional service. Plus, you can’t control how the process pans out, which means that you could risk potential business relationships at the expense of winning cases.

Second Option: Onboarding chargeback management software

The actual chargeback automation happens at this step. You subscribe to a software-as-a-service (SaaS) that automatically manages your chargebacks without you lifting a finger.

Today, many sleek salespeople are parading the industry, promising merchants sunshine and rainbows. But you should know that all chargeback automation tools aren’t built equal. Making the correct choice means analyzing the returns on investment before onboarding any chargeback automation tool. And you should know that Chargeflow is the leading “fully automated” dispute and chargeback management system in the market.

Automated chargeback management removes barriers to data and insights. That data puts you on top of your customer’s buying patterns, with tips to lower your dispute rate and take your chargeback win rate to a whole new level.

The demerits will depend on the vendor you work with. There could be incidents of inconsistent performance, and you could also spend more time and effort on managing the software.

Third option: Hybrid chargeback mitigation solution

Hybrid chargeback mitigation means that you aren’t using a fully automated chargeback system. The program is neither fully managed nor SaaS.

You chose to onboard a SaaS package for tools that look like less headache and outsource the tough ones to a specialist company.

As we stated before, people often confuse this approach with automated chargeback mitigation, but they aren’t the same. The difference is that while a fully automated chargeback handles the entire process without you lifting a finger, the hybrid doesn’t do that. You manage your chargeback systems to find transactions and chargebacks to dispute while relying on a full-service company to handle the actual disputes.

The benefits include that you have some level of control and flexibility. But on the other hand, using the hybrid option means that you have more tools, and managing and coordinating them with partner programs can be difficult.

More so, you might need to onboard more than one program, which means that your team has additional bills to manage.

What are the benefits of chargeback automation?

Research has established that merchant errors cause 40% of chargebacks. And chargeback automation eliminates manual processes that often cause such errors.

The first set of human errors that often result in chargebacks has to do with notification errors. It could be that the merchant didn’t notice a dispute notification on time, and then the dispute response time-limit e expires, which translates into a chargeback. Another merchant error regarding alerts is when the merchant forgot to cancel recurring billings or blacklist a customer with questionable credentials. Hence, the customer makes another transaction, and the vendor receives yet another alert.

The second set of chargeback-producing merchant errors eliminated with an automated chargeback is the reporting error.

Unlike automated chargeback mitigation that could give you just-in-time access to insight from over 50 data points, manual data gathering is challenging work. And you don’t know how much is enough. Even if you have several years of e-commerce experience, you might gather lots of data that does not necessarily speak to the case. In some cases, you might omit highly relevant documentation that could’ve made a difference in upturning the dispute.

On the other hand, you have the error of response and representment. Without chargeback automation, you might not know when the customer filed a case, and if the chargeback expired before you get to respond, that’s a complete loss on all angles. More so, submitting the wrong compelling evidence or submitting your documentation in the incorrect procedure means you won’t win either.

Here are more benefits of chargeback automation:

  1. You have the option to track suspicious transactions before they happen.
  2. The blacklist functionality gives you a valuable database of customers who have filed a chargeback dispute. Synchronizing that with your customer relationship management tool can help you isolate and stop suspicious transactions.
  3. Chargeback automation is to manage the processes and handle chargeback fraud automatically.
  4. You can easily see user transaction behaviors, close loopholes, forecast transactions that could result in chargebacks in the future, and better align your strategies with changing dynamics.

What platforms are currently supporting chargeback automation?

Automation is no longer an either-or proposition in the industry today. It’s a given. As much as “36% of workers fear their employer will fail within five years if the company doesn’t adapt necessary technology.” You might as well move ahead with the tide.

The following are some of the platforms that support automated chargeback solutions:

  • OpenCart: A free PHP-based online shop management system that makes use of a MySQL database and HTML elements. OpenCart supports a variety of languages and currencies.
  • Shopify: A leading eCommerce platform that hosts your online store and uses themes to help you arrange the look of your store. Shopify also has payment processing capabilities, allowing you to accept and receive payments. After a 14 day free trial, you can sign up for as low as $29/mo.
  • Ecwid (short for ECommerce WIDget): An e-commerce platform that allows creatives and small business owners all over the world to build beautiful online stores without the need for programmers or designers. Users can upgrade to a premium plan for as little as $15 per month if they start with a $0/mo package.
  • Magento: Thousands of merchants and businesses rely on Magento's brilliant eCommerce platforms and versatile cloud solutions to innovate and expand quickly.
  • PrestaShop: An online store builder that allows you to design and manage your online store. You may start selling online right now by launching your online store! PrestaShop is free and available in 75 languages.
  • WooCommerce: A WordPress open-source eCommerce plugin created for small to large-sized online businesses using WordPress, undoubtedly gained popularity due to its easy installation process and customization and the freeware status of the base product.
  • BigCommerce: A NASDAQ-listed eCommerce platform that offers retailers software as a service. The company's platform covers online shop design, search engine optimization, hosting, marketing, and security for small and medium-sized enterprises. For as low as $29.95/mo, you can select a plan after your 15 days trial has elapsed.
  • AbanteCart: A free eCommerce application developed, implemented, and supported by a team of skilled enthusiasts dedicated to the project.
  • CS-Cart: A stand-alone web application that allows you to create and manage an eCommerce website of any size, from a tiny online store to a virtual shopping mall with many departments and product providers.
  • CubeCart: Whether you're a merchant wanting to open an online store or a webmaster searching for a client's eCommerce solution. CubeCart is a robust free eCommerce platform that enables thousands of merchants worldwide to sell digital and physical goods online.
  • LiteCart: A software firm that specializes in eCommerce software for small and medium-sized enterprises. LiteCart also offers powerful capabilities starting at $29/mo.
  • MiwoShop: The finest WordPress e-Commerce solution. MiwoShop is a robust shopping cart plugin that is both feature-rich and easy to use. You can upgrade your subscription to get more features, which starts at $59 per month.
  • osCommerce: They provide you with the means to create your own complete and self-hosted online shop and website for free, allowing you to offer items and services to consumers all over the world in a secure manner.
  • WP e-Commerce: Everything you need to sell anywhere is included in the WP eCommerce Plugin! With an attractive online store and a secure shopping cart, you can turn visitors into customers. WP eCommerce has proven to be one of the most popular open-source solutions for entrepreneurs worldwide.
  • ZenCart: A free, user-friendly, open-source shopping cart software that embodies the art of e-commerce.
  • PinnacleCart: An all-in-one website solution meticulously built to boost traffic and conversions while expanding revenues, with a basic $79.95/mo package.
  • Arastta: A free, feature-rich, and high-performing Open Source eCommerce platform.
  • FoxyCart: An e-commerce platform that allows web developers and designers to construct sophisticated yet simple online shopping carts.
  • Easy Digital Downloads: They make selling digital items simple, from eBooks to WordPress plugins to PDF files and more. It's simple to use, and it's free to download. The plan starts at $90/mo.
  • nopCommerce: Based on Microsoft technology, this is the most popular ASP.NET shopping cart in the world. An eCommerce platform that is open-source and free. Although nopCommerce is free to use, it does require Windows hosting.

In closing this article, I leave you with this piece of data: A chargeback automation service such as Chargeflow can help you recover at least $35,022 of chargeback revenue and save a minimum of 150 business hours each month. Would you rather flush that quantum of resources down the pipe?

Average Dispute Amount
Average Dispute Amount
$
30
# Disputes Per Month
# Disputes Per Month
#
50
Time Spent Per Dispute
Time Spent Per Dispute
M
20
calculation
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
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