Credit Card Processing

Things to Consider When Choosing a Chargeback Management Company

by Monica Eaton-Cardone

As ecommerce evolves and new threats emerge, one conversation in particular has started to dominate payment processing discussions: should a business outsource chargeback management responsibilities or manage issues in-house?

If you are faced with this conundrum, there are several things you’ll want to consider. The 6 main areas to think about are:

  • Do you need professional help?
  • What will a chargback management company do?
  • What kind of results can you expect?
  • How will chargeback management software integrate with your current platforms?
  • What is and isn’t included?
  • What will it cost?

If you need a quick refresher on chargebacks or are totally new to the process, you might want to check out our Business’ Guide to Chargebacks before proceeding.

1. Do you need professional help?

Technically, all businesses are capable of managing chargebacks in-house. Card networks provide regulations regarding payment processing procedures—including chargeback management. In theory, you have all the information you need prevent and dispute chargebacks.

But, just because the information needed is readily available doesn’t mean it is easy to implement or that adhering to those guidelines alone will generate significant results. Additionally, it may require more time than you’d prefer to invest to get up to speed on your obligations.

Ask yourself these questions:

  • Does your business have the capacity to analyze and process thousands of pages of technical, complex industry regulations? Will someone be able to interpret these regulations and devise best practices that are customized for your exact business? Can you monitor the adherence of regulations to ensure disputes will be compliant with industry standards? Is someone willing to monitor all card networks to detect minor, yet significant, updates that are made on a regular basis and implement necessary changes in a timely fashion?
  • Issuing banks use humans instead of full automation to process chargebacks. Therefore, not all chargeback procedures are mandated by published regulations; some are governed by personal preferences. Are you capable of establishing and maintaining the necessary industry relations to accumulate this undisclosed information?
  • Can you design an internal system to amass the information needed to create compliant disputes? Do you have the required compelling evidence for each transaction in accordance with every reason code? Can you access this information quickly and efficiently so you can abide by extremely short representment deadlines?
  • Are you confident in your ability to create chargeback disputes that are professional, compliant, and void of errors? Do you know all the ways in which innocent mismanagement issues could actually increase chargebacks and revenue loss?
  • Can you identify the source of each chargeback so you know which cases can be disputed with representment? Are you sure you won’t dispute something inappropriate and damage long-term client retention? Alternately, are you needlessly forfeiting your rights and winnable revenue?
  • Are you monitoring the hundreds of potential issues pertaining to internal policies and operations that could inadvertently be triggering chargebacks? Are you able to objectively and intelligently audit your current practices to identify unintentional errors and oversights that are causing chargebacks?
  • Are you capable of managing your current volume of sales and chargebacks? Are you prepared for unexpected influxes? Or are resources already stretched too thin?

Ultimately, all businesses can benefit from professional assistance, whether that is a fully outsourced solution or simple, on-demand services. The key is to identify areas of weakness in your current operation and then outsource those responsibilities to yield more significant results. Focus on sustainable ROI, rather than quick-fixes that won’t last.

2. What will a chargeback management company do?

All chargeback management companies are different, but the best solution will address both sides of the chargeback issue: prevention and representment (disputing chargebacks to recover revenue).

When evaluating options, chargeback prevention is a key area to consider. Some chargeback management companies offer chargeback alerts as the only form of prevention. Chargeback alerts are helpful and serve an important function; however, they should be just one component in a comprehensive approach—not the definitive solution.

Instead, look for something more inclusive. To prevent chargebacks, you’ll need to know what caused them. Therefore, the best prevention solution is the one that identifies and fixes the underlying problem. To do that, you’ll need advanced technologies, professional advice, or, ideally, a combination of the two.

When evaluating representment services, proceed with caution. This advice may seem cliché, but remember, you get what you pay for. And, as Bill Gates said, automation applied to an efficient operation enhances the efficiency; automation applied to an inefficient operation enhances the inefficiency.

In the world of chargeback management, automated representments are a popular approach. As is the case with anything, streamlining processes is often cost efficient. However, technology isn’t without its shortcomings. Trusting your business’s bottom line and reputation to one-size-fits-all solutions with no human oversight can be dangerous.

3. What kind of results can you expect?

Since there are two aspects of chargeback management, you’ll want to evaluate the reduction of chargeback issuances and the chargeback dispute win rate.

Most chargeback management companies will advertise that chargeback alerts will reduce instances by 25-40%. What they might not tell you is these higher rates are only achievable if you meticulously manage every element of the alert process. Some alerts will still turn into chargebacks, so prompt and effective responses are essential. Also, monitoring is required to ensure costs aren’t doubled when alerts turn into chargebacks. If multiple networks are used, multiple platforms will need to be consulted.

Who will manage all that? It is likely more than a business can effectively handle. The best service provider will help you mange alerts so you do see significant results without additional expenses.

You’ll also want to take promises regarding representment with a grain of salt. Many companies seem to gauge success by win rates, but those claims don’t always paint the full picture.

What to Watch Out For

Here’s what you should be asking about and looking for when considering a company.

  • Does the win rate take second chargebacks into consideration? Is this a net count? If the quote doesn’t include second chargebacks, remember a significant portion of your wins could be reversed. The most effective solution will come with a high net win rate and the ability to reduce the risk of second chargebacks.
  • Will all chargebacks be disputed? If you aren’t disputing all chargebacks and those excluded cases aren’t include in the count, the win rate doesn’t depict what’s really possible. For example, if the company claims to win 40% of disputes, but doesn’t dispute reason codes X, Y, and Z, they are inflating their success by excluding the difficult-to-win situations that could drop their average to a lower number—while also leaving revenue on the table.
  • Does the company offer a win rate guarantee? Every chargeback management company likely offers a guarantee of some sort for their product offerings, and many will quote generic win rate averages. However, calculating an average rate of success doesn’t adequately depict what your unique business can expect. And, the most relevant guarantee is a win rate While it’s true that every business is different and varying factors could impact outcomes, the company should be able to accurately evaluate their potential for success when it comes to managing your individual challenges. This shows the company’s willingness to go above and beyond to secure the best results possible. Without a win rate guarantee, companies imply they aren’t confident in their ability to identify friendly fraud or adequately keep pace with emerging threats. To date, Chargebacks911 is the only company on the market that advertises this sort of performance guarantee.

That being said, win rates need to be evaluated in context. A high win rate shouldn’t automatically be considered a scam. If you’re experiencing high levels of friendly fraud, the service provider should be able to win a significant portion of chargebacks—that isn’t an overinflated promise. In other situations, it might be possible to prevent more chargebacks, meaning there won’t be many left to dispute.

Related Article: What is friendly fraud?

There are other KPIs that should be evaluated too, like a reduction in issuer declines, client retention rates, increased conversions, etc.

Results must be transparent. An essential component of a quality solution—one that should be a determining factor—is pertinent, transparent reporting. In this situation, quality beats out quantity. Hundreds of different reports aren’t helpful if you can’t glean any valuable information from them.

It is imperative to mitigate threats before they become unmanageable liabilities, so reporting must be done in real-time.

4. How will chargeback management software integrate with your current platforms?

The complexity and timeline of integration will depend on how well connected the chargeback management service provider is to other industry entities.

If the service provider needs to create custom integrations for your CRM, processor, or gateway, the process could be quite lengthy. In unfortunate situations, the service provider won’t be able or willing to integrate with the platforms you currently use and force you to use others. Or, they might claim you’ll get better results with one platform versus another.

The best chargeback management service is completely agnostic and heavily integrated with other merchant service providers. You should be up and running without delay.

The chargeback management company shouldn’t be able to access your lead lists or other sensitive customer information. However, the company should be prepared to communicate with processors, gateways, etc. for integration and ongoing management efforts.

When evaluating options, don’t forget to inquire about integration fees.

5. What is and isn’t included?

Some service providers are more robust than others. Your individual needs will help you decide how extensive the product offering needs to be.

International Processing

eCommerce has introduced a global marketplace. If you are taking advantage of international selling opportunities, or will in the future, you need a service provider that is capable of scaling with you and addressing the unique threats originating from different geographical regions. Look for a service provider with an international presence.

You also can’t be hindered by a service provider’s inability to manage transactions in certain currencies. Fortunately, there are chargeback management companies who are capable of working with any currency.

Reason Codes

Some chargeback management companies limit their representment services to certain reason codes, meaning some disputable chargebacks won’t be challenged and needless revenue loss will accumulate over time.

For example, if you sell products on a subscription billing model, you’ll need a service provider who’s willing to challenge “recurring transaction” chargebacks.

Be sure to inquire which chargebacks will be disputed and what limitations will be enforced. Ideally, you’ll be able to recover revenue for all reason codes.

Comprehensive Assistance

Check to see what ‘extras’ the service provider offers. Some might also sell fraud filters, for example. Or, the company might provide a call center.

Sometimes it is beneficial to receive extra assistance, but other times, it is too restrictive to be forced into a situation that isn’t a good fit for your company.

Usually, it’s best if the chargeback management company can help you analyze and optimize your current efforts—make your current tools and processes more efficient. Ultimately, the goal of risk mitigation is to generate sustainable profitability—and one-size-fits-all solutions don’t usually accomplish that as well as a personalized approach.

Service Levels

Again, will you be able to pick a customized management solution that’s best for your individual needs or will you have to accept the generic services that are provided to everyone else?

Depending on your in-house capabilities, you might be interested in managing certain responsibilities. If that’s the case, you ought to be able to receive assistance just in the areas where you need it most. On the other hand, if you want to outsource the entire process, you shouldn’t be expected to complete tasks that you’re ill-equipped to manage.

6. What will it cost?

There are a variety of ways a chargeback management company might assess fees.

  • A monthly fee may be assessed.
  • A paid-on-performance option may be used.
  • Each individual action may incur a fee, like a per-alert fee or a per-representment charge.
  • A per-user option might be available for software.
  • Some companies offer an “upgrade” for things like consultations, while others provide those services for free.
  • If price is based on transaction volume, carefully consider future growth potential.
  • A set-up or integration fee may be required, as well as a cancelation fee.
  • Some companies suggest long-term contracts, while others allow you to cancel with just a few days’ notice.

In the end, the best payment plan is a dynamic model that fits your individual needs.

Do You Need Chargeback Management Help?

If you are interested in learning more about a chargeback management company, you can request a demo. A well-educated sales representative will be able to answer your questions, address you concerns, and articulate what the company is capable of.

If you have general questions regarding the in-house vs. outsource debate, share your comments with the community here.

2 thoughts on “Things to Consider When Choosing a Chargeback Management Company”

  1. Any suggestions for this situation? We have a service based business. A former client decided four months later to dispute 56 transactions for services rendered with one processor and 32 transactions with our other one. He claims he doesn’t recognize the transactions even though he paid half of them himself from his computer and gave us a signed authorization for the others. We have submitted proof of completed services along with each invoice to our processors who say they will deal with clients credit card company. So far they haven’t been chargebacks but the results are both our processing companies have taken a lot of money to hold for the inquiries and continue to try to deduct from our account plus charge fees. Our processing is on hold, our account is negative, we can’t collect money from other clients, our responsibilities are suffering and it might put our otherwise strong legitimate business out of business because this client is the definition of fraudulent. With each day that passes makes it harder to do anything about it. Any suggestions? Even though there aren’t chargebacks yet how can the processors continue to hold our money?

    1. Unfortunately, there’s not a lot you can do in that situation. Typically when a dispute starts, the money will be held until it’s resolved. Your best bet is to keep in contact with your processor(s). Good luck!

Leave a Comment

Your email address will not be published. Required fields are marked *

Credit Card Processing exposed

Use the secrets that credit card processors don't want
you to know to drastically lower your credit card
processing fees.

Read Now!

You might also like…

View all articles..