How to Choose a Total Chargeback Management Provider

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1 How to Choose a Total Chargeback Management Provider Chargebacks impact all types of merchants physical goods, recurring, digital goods merchants to the tune of $40 billion every year. This problem continues to escalate as ecommerce booms and emerging technologies and industry standards complicate the landscape. Online sales have exploded over the past 5 years, rising from $144.9 billion in 2009 to $304.9 billion in Subsequently, fraud is at an all-time high. 1 Matters are complicated by the EMV liability shift, which puts the onus on merchants for fraud related chargebacks that happen at a non-emv capable POS. 2 The shift is also predicted to push fraud to the online channel, an easier exploit for nefarious characters. Many merchants turn to single point solutions that address only one half of the chargeback problem; prevention or dispute management to recover lost revenue. The most effective strategy combines chargeback prevention with representment and revenue recovery for a streamlined approach to fighting the overall chargeback problem. Given the factors that online merchants regularly face and the reality that many of these retailers are already stretched thin when it comes to internal resources, it can be beneficial to work with a third-party vendor for total chargeback management. Outsourcing frees up internal resources to focus on core business competencies and in many ways, can increase efficiency and effectiveness of fighting chargebacks. A partnership with a partner who can support all aspects of the chargeback issue helps relieve the chargeback burden on the merchant and can improve results in recovering revenue that would have otherwise been lost. Finding the right total chargeback management solution partner can be an involved process. We ve outlined some key considerations for you to ask when seeking a solid partnership. Online sales have exploded over the past 5 years, rising from $144.9 billion in 2009 to $304.9 billion in Verifi, Inc.

2 General Considerations The onslaught of chargebacks may pressure a merchant to choose a management provider as quickly as possible. But not all vendors are equal. It s best for merchants to make a smart choice based on a number of important considerations. Aside from prevention- or recovery-specific considerations, there are some general qualities and concepts that a merchant should research as it relates to a total chargeback management partner. We ve outlined the most important below: Consideration Why It s Important Common Shortfalls Companies that make unrealistic claims Merchants may not get the promised results. A company that says it can prevent every chargeback is suspicious. Chargebacks are a consumer protection and won t disappear. Companies that misrepresent their abilities Merchants may count on qualities that don t exist. A vague approach to the chargeback process, a lack of understanding of the business and no guarantee are red flags. Companies that don t investigate the real source of chargebacks Merchants can continue receiving unnecessary chargebacks because the provider didn t resolve the true cause of certain disputes. Companies that just accept reason codes without taking the time to dig deeper will not get to the root of the problem. Deceptive marketing It s a good disguise for inefficiency. Companies that claim to be fully automated may lack the manpower to handle problems as they arise. Companies that don t handle digital products This may point to a lack of expertise or an unwillingness to fight difficult battles. This statement is a red flag because it already shows the company will abandon the merchant in certain scenarios. Companies that say it s not worthwhile to address all reason codes It s best to look at all chargebacks on a case-by-case basis and not automatically exclude certain reason codes. This claim indicates the company will not be the best advocate and do everything it can to fight for the merchant Verifi, Inc. 2

3 Prevention Considerations Chargebacks can be an overwhelming burden to online merchants. So a management company that is dedicated to prevention, taking steps that go beyond the norm, is always a wise choice. Consideration Why It s Important Common Shortfalls Source of the data The source of the data is directly tied to the accuracy of chargeback alerts. Solution providers often supplement their process with inaccurate, non-direct and aged data sources that can result in a high defect or failure rate, increasing the true cost per chargeback alert. Timing of the data The timing in which the merchant receives chargeback alert data can impact the available resolution options s/he has. Due to the communication flow of information, merchants typically don t receive information until it is too late, leaving a small window of reaction time that creates a race to the refund, where merchants try to refund the customer before the chargeback processes. Communication delays Merchants only have so much time to respond to a dispute before the chargeback process takes hold and they face the possibility of defects and double refunding. Some providers rely on TC40 data, which can lead to communication delays information is pinged indirectly between issuers, card brands, aquirers and merchants. These delays cut down the time a merchant is given to respond to a dispute and can require the merchant to rush to post a refund in a short amount of time before the chargeback is processed by the issuer. Companies that don t go beyond addressing existing chargebacks Merchants need a provider that investigates the source of chargebacks to minimize complaints. A company that only looks at the surface is not examining the merchant s history to fix the issue and prevent chargebacks. Companies that have excuses about investigating certain chargebacks A management company should do everything it can to challenge chargebacks as they appear. A company that claims it won t look at a chargeback because of a reason code shows it is not equipped to help the merchant. IT integration A management company needs to be able to provide IT support tailored to the merchant s needs. Companies that have complex set-ups can get in the way of the merchant s day-to-day business or take staff away from important functions. False positives Paying for alerts that are not really chargebacks means you paid more than you think. Some solutions can have false positive alert rates of 50% or even more. The actual price you paid for true chargeback protection is much higher as a result. Complete coverage Not every chargeback is due to just true fraud or just friendly fraud. The provider should be able to look at all types of chargebacks. Companies that only focus on friendly fraud are not resolving non-fraud chargebacks, which can also drain a merchant s revenue Verifi, Inc. 3

4 Recovery Considerations Like prevention, successful recovery means going above and beyond the norm. Merchants should look for providers that take the time to do whatever it takes to recover lost revenue. Consideration Why It s Important Common Shortfalls A thorough look at every reason code It s important to get to the heart of a consumer s motives to figure out the exact cause of every chargeback. In many instances, the true source of a chargeback is incomplete or inexact information. Awareness of every risk New threats appear everyday. Good providers adapt and innovate to protect merchants from chargebacks. Companies that aren t on top of the influx of threats leave merchants open to attacks by cyber criminals. Expertise on every level A good use of technological tools is important. But relying too much on software without applying knowledge that s customized to every situation can be a liability. Good providers combine software expertise with extensive experience to find the best solutions. Many providers turn primarily to software without the experience necessary to solve chargeback issues that go beyond the software s capacity. Guarantees A merchant has extra protection in the event that a resolved case becomes a chargeback. Companies that don t offer guarantees can cost the merchant more if cases turn into chargebacks down the line. Makes sure numbers reflect all stages of recovery Some solution providers stretch their recovery rates and don t include second representments. This doesn t give merchants an accurate picture of the costs involved. It s advised that merchants investigate a provider s history of performance to ensure its effectiveness at fighting chargebacks. Questions should include asking for the overall success percentages in winning chargebacks. Flexibility in terms of outsourcing Depending on the size of the business, the costs associated with outsourcing chargeback management can be expensive. Good providers offer flexible options that are customized to the needs of each business. Companies that do not provide flexible options for outsourcing may not be able to offer cost-effective chargeback management, especially for smaller sized businesses Verifi, Inc. 4

5 Conclusion There are many considerations that merchants need to weigh before choosing the right chargeback management provider. It may seem complicated to keep numerous aspects in mind before making a final decision. But the choice should all come down to one central point: merchants must find a partner that protects their bottom line from chargeback fraud at every level. By avoiding costly fees, fines and penalties at each stage, a merchant will be better able to sustain itself in the marketplace and continue its path to growth. By avoiding costly fees, fines and penalties at each stage, a merchant will be better able to sustain itself in the marketplace and continue its path to growth. The Verifi Difference As a leader in the payments space since 2005, Verifi s Total Chargeback Management Services include our award winning Cardholder Dispute Resolution Network (CDRN) and our Premier Chargeback Representment Services (CBR). This prevent and reclaim approach helps merchants prevent chargebacks and recover profits loss to chargebacks. Cardholder Dispute Resolution Network (CDRN) Verifi s flagship solution the Cardholder Dispute Resolution Network (CDRN) has helped startup level to Fortune 500 merchants stop chargebacks before they happen. CDRN stops up to 40% of chargebacks via its patented closed-loop network that directly connects merchants to top issuers to deliver near real-time chargeback notifications. Merchants choose the award-winning CDRN for chargeback prevention because it eliminates false positives and defects, ensuring that the merchants only pay for notifications that actually stop real chargebacks, allowing them to resolve the dispute directly with the cardholder and bypass fines, fees and penalties. Premier Chargeback Representment (CBR) Service Verifi s Premier Chargeback Representment (CBR) service helps merchants win up to 50% of representments nearly DOUBLE the industry average, CBR relieves merchants of the burden on internal resources to fight chargebacks and requires no integration or IT hassles. Our team of experts have a wealth of knowledge across all reason codes and their industry experience help them inform merchants on which chargebacks to fight and when to walk away, ensuring optimized revenue recovery with a pay-for-performance pricing option. Citations Verifi, Inc. 5

6 About Verifi From startups to Fortune 500 companies, Verifi is equipped with the versatility to work with a wide range of industries to maximize revenues and reduce all aspects of chargeback losses. Headquartered in Los Angeles, California, Verifi processes more than $20 billion transactions each year and manages more than 8,900 accounts worldwide. With its proven team of experts and award-winning custom solutions, the Verifi Difference consistently protects merchants payments and significantly boosts profits for the entire transaction ecosystem. Question? Our chargeback experts are always available to help. Give us a call at (323) We re in the office from 8AM PST to 5PM PST and we re ready to help you protect payments and boost profits now. Why Choose Verifi? Partner with Verifi to reduce your payments risks, streamline business processes and lower operational costs. Whether its stopping fraud, maximizingyour billings on our flexible and robust global gateway or our award winning chargeback prevention and dispute management services, our team of expertsand custom solutions will protect your payments and boost your profits across the entire transaction lifecycle. Contact Verifi info@verifi.com Verifi, Inc. ALL RIGHTS RESERVED. 6