Chargebacks are a serious problem for eCommerce merchants, and unfortunately, no matter how you measure them—disputes filed, total revenue lost, cost per dispute—the fact remains that chargebacks are on the rise.
Most of these cases are friendly fraud; in fact, according to our own internal data at Chargebacks911®, roughly 4 out of 5 chargebacks filed do not have proper justification. The relative ease of filing a dispute, as well as inconsistent standards and rules applied in assigning liability, enticed more and more customers to engage in this practice.
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This is fueling an increase in overall chargebacks. According to data presented by Javelin at MRC Vegas 2018, merchants lost roughly $31 billion in 2017 to chargebacks and related costs…nearly double the total losses in 2013.
Are Alerts the Answer?
What are merchants doing to address this threat?
Traditionally, most see chargeback alerts as their main tool for preventing chargebacks. These automated alerts notify merchants if a dispute is initiated and enable them to refund the purchaser before the situation devolves into a chargeback. Alerts are a useful stop-gap measure, as they enable merchants to “put out the fire,” so to speak.
When in immediate danger of breaching chargeback thresholds, alerts provide time to address the problems that caused the chargebacks in the first place. They also help mitigate the impact of any genuine criminal fraud that slips-through front-end fraud filters.
Of course, the problem with traditional chargeback alerts is that they’re an entirely-reactive solution. Alerts can intercept disputes in progress, but they don’t do anything to prevent chargebacks…until now.
The new product from Chargebacks911, Enriched Alerts Service (EAS), improves on this model. Rather than try to intercept a dispute, the Enriched Alerts Service allows merchants to deploy a digital remedy or cancellation confirmation to prevent the dispute from happening in the first place.
EAS is the first-ever alert tool capable of separating legitimate chargebacks from friendly fraud. No more refunding friendly fraudsters simply to avoid a chargeback; instead, merchants have the option of engaging identified friendly fraud through tactical representment.
We leveraged our extensive body of chargeback data, along with issuer feedback and individual case analysis, to develop this new product. This insight is critical because, with implementation of Visa Claims Resolution just weeks away, traditional alert products simply won’t cut it anymore.
A Key Component of a Broader Chargeback Solution
Chargeback alerts can come in handy…but that doesn’t mean merchants should rely on them as their primary dispute prevention tool. Instead, merchants should see alerts as just one component in a much broader strategy for comprehensive chargeback reduction.
Even with Enriched Alerts Service, a chargeback alert still has a lot of limitations. An alert allows the merchant to avoid the fees and business threats that come along with a chargeback, but it doesn’t resolve the problem that caused the chargeback in the first place. The merchant still loses revenue and merchandise and must dedicate time and energy to challenge the dispute.
Only by leveraging EAS alongside other chargeback mitigation tools can merchants can reduce initial chargeback filings for genuine, long-term chargeback prevention. Chargebacks911’s existing technologies, when used as part of a broader strategy with EAS, offers two-fold ROI. Merchants see immediate improvement in their chargeback-to-transaction ratio, combined with an ongoing reduction in initial chargeback issuances.
Friendly fraud is a dynamic, constantly-changing problem. Businesses that aren’t thinking about how to leverage different tools as part of a long-term chargeback strategy are going to see stilted, uneven progress in mitigating threats.
Remember: there is no one, single answer for this problem. EAS is a great step toward addressing the chargeback situation, and merchants will absolutely benefit from it…but only as part of a larger strategy to maximize their efforts.
Article by Monica Eaton-Cardone
About Monica Eaton-Cardone:
Monica Eaton-Cardone is an entrepreneur and business leader with expertise in technology, e-Commerce, risk relativity and payment-processing solutions. She is COO of Chargebacks911 and CIO of its parent company Global Risk Technologies.