Author: Tom-Chris Emewulu
Digital Evangelist

With the frequency of chargeback frauds, you might even be dealing with one right now.

And you know, as research clearly shows, that most chargebacks, specifically ~80%, are meritless – someone is trying to game the system and take your lunch money.

As horrible as friendly fraud is, you’re not entirely helpless. Chargeback representment gives you the chance to make your case and recover meritless chargebacks.

Although it’s a complicated process, chargeback representment is essential for every eCommerce business to stay alive in these times of elevated chargeback cases. And, if you keep reading, we’ll help you get the hang of the process quite nicely.

We shall answer the following essential questions:

a. What is chargeback representment?

b. Why should you fight chargebacks as a merchant?

c. How do you prepare for your chargeback representment?

d. What happens after chargeback representment?

Let's get started!

What is chargeback representment?

Chargeback representment is a construct established to help merchants defend legitimate transactions and possibly recover lost revenue. Generally speaking, the merchant is re-presenting the disputed transaction to the bank and card brand.

In most instances, the cardholder will contact their bank to dispute a transaction bill, at which point they'll provide their reason for fighting the transaction. Often, they also give some pieces of evidence for why they wish to overturn the transaction.

The process is such that when you receive an illegitimate chargeback, you can submit evidence to prove the chargeback is meritless. The issuing bank will review your documentation, and if they find it sufficient to reverse the chargeback, you will win the dispute.

That is to say; when a cardholder files a chargeback against you, you can do one of two things:

  1. Accept the chargeback. You will lose the transaction revenue, sold goods/services, and other ancillary order expenses such as shipping, packaging, fulfillment, and interchange.
  2. Represent. You can fight the chargeback by representing. And if you have sufficient compelling evidence, you can overturn the chargeback, as we intimated earlier.

Why you must fight all meritless chargebacks

One of the sad realities of chargebacks is that once a cardholder files a case, you will lose money - whether you win or lose the dispute. You'll be responsible for paying a non-negotiable chargeback fee. Yet, the chance to set the records straight and potentially recover lost revenue is worth taking any day.

Aside from recovering your rightful revenue, chargeback representment helps you avoid operational challenges due to high fraud risks. For one, banks see merchants with a load of uncontested disputes as a significant risk, which means higher processing fees. And, in extreme cases, it might be tough to find a carrier or acquirer to work with you.

On a broader scale, cardholders who perpetuate friendly fraud think such behavior is harmless when merchants continue to write off such losses as the cost of doing business. That's why 40% of fraudsters who commit friendly fraud will repeat the act within 60 days.

In the final analysis, fighting chargeback fraud is beneficial for the sustainability of your business, helps your standing with processors and the industry at large.

Here's the actual cost of chargebacks to your business.

How do you prepare for chargeback representment?

For your chargeback representment to be successful, you must be able to track down the causes and sources of the chargebacks.

Narrowing down the chargeback reason code, which is why the cardholder is disputing the transaction, can be a slippery rope sometimes. Chargeback reason codes do not always show the actual intent of the cardholder. However, it's advisable to respond to whatever reason code you received from the bank.

If you've determined the chargeback is meritless, and you know the reason code, below are the five stages of an effective chargeback representment.

Stage #1: Awareness - be aware of the chargeback response time limit.

Per standard processes, banks require you to respond to a chargeback within a rigid time frame. This period is crucial if you wish to overturn the dispute. Missing the stipulated time limit means a hundred percent loss by forfeit.

Aside from the varying reason codes, different card networks have unique chargeback time limits. Do well to review the dispute notification or Chargeback Debit Advice Letter from your bank for your response procedure.

Stage #2: Plan - gather relevant documentation

It bears repeating that to win a chargeback representment, you must have compelling evidence that establishes the validity of the said transaction. Such documentation can differ depending on the bank, card brand, and stated chargeback reason code.

Examples of compelling evidence you should include are as follows:

  • Sales receipt or order forms
  • Product delivery proof and shipment tracking numbers
  • Copy of your return policy and evidence that the customer could access it on your website
  • Relevant customer communications across service touchpoints showing order delivery or customer satisfaction
  • Merchandise or service descriptions and screenshots as shown on your website
  • IP address or timestamps showing the cardholder accessed a digital good after purchase

Stage #3: Initiate Action - Craft an airtight Rebuttal Letter

As a standard process, you must submit a chargeback rebuttal letter, a formal case outline, and documentation supporting your claim. Ideally, your rebuttal letter summarizes your evidence and how it shows the transaction's validity. It's your side of the story.

The best practice is to keep your rebuttal letter succinct and emotion-free. Dispassionately state the facts in crisp, professional tenses and avoid bloated descriptions.

Here's how to write an effective chargeback rebuttal letter.

Stage #4: Represent - Send in your representment

Ensure that you submit all compelling evidence to the acquirer, who will transfer the documentation to the issuer to review and make a decision. Time is of essence here. Be sure to send in your representment on time, follow the provided guidelines, and don't leave any piece of evidence behind. And if you have essential supporting documents, such as Chargeback Adjustment Reversal Request or Chargeback Debit Advice Letter, add them.

Stage 5: Evaluate - Do a chargeback ROI analysis.

Data-driven decisions are the ultimate competitive advantage. Hence, it's essential to always track relevant case outcomes for learning curves and improvement opportunities.

Even though obtaining and analyzing your representment results is extremely difficult for the average merchant, you do your business much harm if you don't put in the work to isolate patterns, risk factors, and relevant KPIs. Sufficient data enrichment, such as Chargeflow will provide, helps you to audit your chargeback representment for what's working or not.

What’s next after representment?

The issuer’s decision after reviewing your evidence can be any of the following outcomes:

  • You won: The initial chargeback was reversed, and the case was closed.
  • Cardholder won: Your evidence isn’t sufficient to overturn the chargeback.
  • You won, but the cardholder appealed: Your claim was rejected because of a piece of new evidence. This stage is known as a “pre-arbitration chargeback” or “pre-arb” chargeback.

Industry records show the average merchant’s chargeback win rate is only 12%, meaning more merchants lose chargebacks than those who win. A merchant’s chance of winning chargebacks manually is abysmally poor.

Not only are the regulations dishearteningly complex, but the rigid timelines also make responding to chargebacks overwhelming and time-consuming. Additionally, the terms across networks and fraud patterns are constantly changing, making it difficult for merchants to catch up. And an over-aggressive representment approach can end up being a double negative as well.

Instead of playing such a whack-a-mole game with fraudsters, you can automate your chargebacks with Chargeflow and refocus your resources and workforce on other essential aspects of your business.

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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