Chargebacks are not popular among e-commerce merchants.
The reason is obvious: Fraudsters are increasingly weaponizing chargebacks to take advantage of merchants.
The spike in chargeback cases is astronomical. Just Google it. The numbers will make your brain hurt.
Analysts estimate that “77.25% of disputes classified as fraud were friendly fraud,” a customer intentionally disputing a legitimate transaction. One study predicts that merchants could lose up to $130 billion to chargebacks by 2023. (This article details the actual cost of chargebacks to merchants).
As sad as it may sound, the reality is that chargebacks can happen anytime. And if you don’t know when the dispute or fraud occurred, you cannot mediate them effectively—making it vital to integrate a Chargeback Alert solution. And this article has extremely crucial insights to help you implement the requisite chargeback alert solution for your business.
What is a Chargeback Alert Solution in simple terms?
Before we discuss what a chargeback alert solution is, let’s look at the chargeback lifecycle.
The cycle starts with the cardholder. When a transaction goes wrong (due to unauthorized billing, duplicate charge, item not received, or item significantly different from the description), the cardholder can file a dispute with the Card Issuer or bank to nullify the transaction.
The card issuer will then review the details of the dispute. In some instances, they might invite the merchant to send further information on the transaction. If they determine that the buyer’s claim appears accurate, they will grant the chargeback by withdrawing the funds from the merchant’s acquirer and back to the buyer.
They will inform the acquirer about the chargeback and create a chargeback reason code, which is their reason for reversing the payment.
At that point, the merchant will have to decide whether to accept the chargeback or fight to establish the transaction. If they choose to fight it, they'll have to provide a set of evidence that shows the chargeback is meritless.
Upon receiving the compelling evidence and rebuttal letter from the merchant, the acquirer submits the merchant's documentation to the issuer. And then, the issuer will review the merchant’s representment. If they are compelling enough to legitimize the transaction, the issuer will reverse the funds back to the merchant’s account.
But if they ruled against the merchant, as is the case in most disputes, the process can go on and on, requiring an enormous amount of time commitment.
By integrating a Chargeback Alert solution, you can quickly get a just-in-time notification immediately after the buyer files a complaint with their issuer. That gives you ample time to resolve the dispute before they turn into a chargeback.
In simple terms, Chargeback Alert Solution is a service that, if a merchant signs up for, will send an alert of an incoming chargeback in 24 hours. If the merchant refunds the transaction in those 24 hours, he/she will not get a Chargeback.
How much does chargeback alerts cost and why is it important?
Typically, the cost of chargeback alerts to merchants defer, depending on the number of alerts you get and other indexes. However, companies that offer that service usually charge between $35 - $50, per alert received.
That said, the chargeback alert solution puts merchants in the driver's seat of chargeback mediation instead of every chargeback incident taking them unawares. If your chargeback ratio is high [i.e above 0.9% and 100 chargebacks per month], you can get into the excessive chargeback program, which can cause penalties of up to $50 per chargeback. When you do the math, you are looking at a $5,000 penalty per month, along with a chargeback fee of $15-$30 per chargeback, and all the other associated costs.
But with the alerts system, you can proactively take care of the customer dispute. There will be no chargeback by proactively resolving the dispute directly with the customer before the issuer reaches a decision. That will mark an end to the dispute -- canceling out the involvement of the acquirer.
As intimated above, you also get to save time and financial resources that you'd otherwise spend in the lengthy chargeback process. And if you are a high-ticket merchant or in a high-risk vertical, a chargeback alert helps to keep your business alive. It's a non-negotiable solution for your business.
Insights into how a Chargeback Alert works
Chargeback alert services integrate your transaction data into your merchant account. Immediately a customer files a dispute on any transaction, the system will notify you of such activity. Then you have the opportunity to decide on whether you want to proceed with the transaction, offer a refund, or start gathering your compelling evidence for representment.
Verifi's Chargeback Dispute Resolution Network (CDRN) is an example of such mechanisms. CDRN alerts participating vendors of impending chargebacks: giving them 72 hours to mediate the dispute.
CDRN obtains direct dispute notifications from banks and freezes the chargeback process for 72 hours, giving the merchant ample time to plan their next move. Verifi charges participating vendors a fee for every alert they receive from the CDRN, irrespective of how they choose to handle the dispute. But compared to the dangers of having one's account terminated and ending up on a blacklist, the fees are negligible
It gets even better.
With ChargeResponse®, a proprietary tool offered by Chargeflow, you don’t need to worry about how to mediate the dispute. The program gives you adequate data to plan your next move.
You also get loads of other benefits such as shooting your profits through the roof while keeping fraudulent chargebacks at bay, reducing your Chargeback-to-Sales Ratio, and avoiding the negative impact of refund, return, and chargebacks.
It makes no sense to keep falling prey to fraudulent chargebacks when you can quickly mitigate such risks. The easy way to beat the online shoplifter to their game is to stay ahead of the curve by anticipating and eliminating fraud.
Moreover, as any disciplined merchant, you definitely want to avoid processing "unauthorized transactions" that ultimately result in disputes.
But if you don’t have the tools to keep a pulse of such data, how can you avoid the pitfall? How can you avoid fraudulent chargebacks?
Online shoplifters don’t care about settling disputes with you. Their sole purpose is to use stolen cards and bait you into becoming a victim. That’s their job. And they are good at it.
With the laborious process of reversing a chargeback these days, you stand little chance at winning the battle. Except you have an excellent mitigation solution that can also predict which transactions can turn into potential disputes by pulling from several data points.
Chargeflow’s helps you focus on growing your business
The fact is, you want to always take your business to the next level. Not preoccupied with winning back lost revenue.
Getting a chargeback alert is wonderful. But having access to extensive data on any transaction and knowing how to adequately respond to any dispute is a whole new level of business. Chargeflow created a 360° dispute automation system that defends your business from the unpredictability of payment disputes.
As highlighted in the earlier section of this copy, the chargeback lifecycle often takes several weeks. With the multiple layers of complication in the process, you barely stand a chance.
But that’s before Chargeflow re-invented the chargeback mitigation process. If your business faces any chargeback, we deploy insightful data to help you fight the chargeback and win. And if we don't win, then it's free. We don't earn a dime if the dispute does not go in your favor.
Our extensive dispute management algorithm pulls from over 50 data points associated with the disputed order to strengthen your representment.
Chargeflow uses AI and Machine Learning to generate the world's most comprehensive dispute response after processing the required information.
Getting started with our platform is seamless and straightforward. Sign up today and shield yourself from the dangers of excessive fraudulent chargebacks.
How do I set up chargeback alerts for my business?
Chargeflow offers Chargeback Alert services for every business. Get set up in a few minutes and benefit from industry-leading rates and fully managed service. Schedule a quick demo and set up your Chargeback Alerts.
What should I do if I receive a chargeback alert?
With Chargeflow's Chargeback automation, you don't have to do anything. Our system will handle the things related to the chargeback dispute and works towards helping you win the chargeback.
How do I reduce the number of chargebacks alerts I receive?
Implementing fraud prevention tools, monitoring customer behavior, providing clear policies, using a service like Chargeflow, regularly reviewing transaction data, and keeping accurate records can help reduce the number of chargeback alerts received. It's important to work closely with merchant services providers or acquiring banks to manage and prevent chargebacks.
Is it possible to get a chargeback alert for a specific transaction?
No, getting a chargeback alert for a specific transaction is not possible.
What happens if I don’t respond to a chargeback alert?
If you do not respond to a chargeback alert, the dispute process may proceed without your input, potentially resulting in a chargeback being issued against your account. You may lose potential revenue and increase your chances of being labeled as high-risk merchants. To prevent this, we recommend you to use chargeback automation tools like Chargeflow.