Chargeback alerts: Prevent disputes without IT work

Chargeback alerts: Prevent disputes without IT work

Digital & Technology

Arpit Joshi

Arpit Joshi

11 Apr 2018, 09:24 — 5 min read

There are many pitfalls that merchants face while doing business. One of these is chargebacks. A chargeback is a charge that is returned to a payment card after a customer successfully disputes an item on their account transactions report.

Chargebacks can take up a lot of time and resources to resolve and can also in some cases cause severe financial loss to merchants. A low chargeback ratio is often key to a healthy business. It is therefore important for a merchant to devote some time and energy to understanding chargebacks and how their impact can be minimised.

 

Although every merchant wishes to attain zero percent chargeback ratio, but it is not always possible. You cannot get rid of chargebacks, especially, if you accept payments through credit card. But you can always opt for solutions and ways to intercept chargebacks before they hit you. This can be done with the help of chargeback alerts.

 

Chargeback alerts

When a customer contacts the issuing bank to file a chargeback, the issuing bank enquires about it and determines whether the complaint is genuine. If it is, then the card network is notified of the dispute. Here, at this point, the chargeback alert system receives the notification of the incoming chargeback before it is submitted to the card network.

 

How can chargeback alerts help?

If the notification related to chargeback is generated on time, the merchant gets time to prepare a plan of action in order to respond to the incoming chargeback. This plan of action can be:

 

  • Full or Partial Refund: Being one of the most common response for chargeback alerts, merchant can effectively stop the chargebacks by setting up rules to automatically generate refund to the customer.

  • Blacklisting the Customer: It is a harsh step to blacklist a customer but sometimes become necessary as a respond to chargeback alerts. If a customer is doing friendly fraud, it is fine to block the customer permanently. Blacklisting works as a safeguard against problematic customers.

  • Cancelling Services: Chargeback gives opportunity to the merchant to cancel the services for a particular customer the moment the transaction is disputed, especially if your business uses recurring and subscription billing.

  • Cancelling Shipments: If the shipment is still in fulfilment, through chargeback alerts, merchant can cancel it before it is sent to the customer, which might stop the chargeback.

  • Rerouting Shipments: If the chargeback is received after the product is shipped, merchant can still reroute the shipment and can get delivered it to the warehouse. This method is as effective as cancelling the shipment.

  • Accepting Chargeback: If the merchant chooses not to respond to the chargeback, it proceeds to the card network, as it would do normally. This will affect the chargeback ratio of the business but the merchant can still dispute it.

 

Who can avail chargeback alerts?

All the merchants, irrespective of industry type, are benefitted by chargeback alerts. But high-risk merchants or merchants dealing with large volume of chargebacks are benefitted the most.

Issuers and card networks consider high-risk merchants as liability and a financial risk. There are number of factors that defines a business as high-risk and these are:

  • Chargeback history of the merchant

  • Irregular and high ticket sale

  • Part of industry whom reputed banks do not support

  • Highly regulating industry

  • High chargeback ratio merchants: Traditionally, the businesses do not appear as high-risk, but a high chargeback ratio puts them at risk and thus they fall in high-risk category. Few industries that fall under such category are:

      • Software 

      • Travel and hospitality 

      • Apparel

      • E-commerce

 

Why use chargeback alerts?

  • Protects your chargeback ratio

  • Reduces fee and Increases profit

  • Ensures better customer relationship.

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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.

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