Why Do Credit Card Chargebacks Happen and at What Cost?
Chargeback management for card-not-present (CNP) payments has always been critical. But in an era of increasing fraud and chargebacks, it is more crucial than ever for card issuers and merchants to collaborate to reduce CNP risk. Issuers and merchants face increased pressures from these market forces, all of which have a trickle down effect that eventually reaches the consumer in the form of higher prices.
As increasing regulations squeeze the margins of issuers, the rising cost is passed down to merchants. In turn, you often have no choice but to pass this price tag on to your consumers. Chargeback disputes bring with them costly chargeback fees along with the time, energy, and resources that you and the issuer cannot afford to waste.
Fortunately, there is a solution that can benefit the entire payment lifecycle.
Issuer and Merchant Collaboration Helps Relieve the Burden
Issuers and merchants can communicate more quickly and effectively when they are part of a collaborative network facilitated by a service provider, such as Chargebacks.com. Within this secure and safe network, issuers and merchants can communicate through chargeback dispute notifications. This open-door collaborative communication happens when issuers directly notify you, the merchant of pending disputes. Having this information and notification early in the chargeback dispute process empowers you to resolve the dispute directly with the consumer.
By communicating with the customer before a dispute is processed as a chargeback, you have the opportunity to resolve the issue and process a refund or issue a credit so that a chargeback never occurs.
This collaborative data sharing can happen in real time, greatly aiding the fight against fraud for both merchants and issuers. Instead of immediately filing a chargeback, issuers provide real time notifications through the network service provider to notify merchants if the likelihood of a chargeback result is high. This allows you to resolve the dispute quickly and directly with the cardholder, creating a favorable outcome for all involved parties.
Not to be overlooked is that this collaborative communication system can help ensure you have happier and satisfied customers. When the customer has a chance to deal directly with you to get their problem solved, they are more likely to feel satisfied with the level of customer service. This is vitally important when building brand loyalty and repeat customers. A happy customer is less likely to file a credit card dispute or to make a fraudulent chargeback claim.
Benefits for Issuers
When issuers hand disputes directly to merchants for resolution, this allows the issuer to use their valuable resources to focus on core business competencies. Again, helping to preserve the customer experience and build their trust in your services.
Collaborative networks between the issuer and you, the merchant also offer:
- Higher Efficiency: Issuers can automate the dispute resolution process and resolve problems quickly.
- Reduces Cost of Compliance Burden: Properly filing chargebacks with the correct reason codes and documentation is time-consuming. Issuer alerts eliminate the need for this step by allowing the financial institution to pass this conflict to the merchant so that it is handled directly.
- Better Customer Experience: By using alerts to bring the merchant into the loop and communicate one-on-one with the cardholder, the customer wins and leaves as a happy customer. When disputes are handled internally by issuers, it may lead to lags in response time, lack of efficient access to critical documentation, and other problems – all culminating in a frustrated customer who may not hesitate to voice concerns on social media, review websites, forums, and with friends. Remember this customer is also the issuer’s customer and the issuer wants to keep them loyal to their credit or debit card service.
- Lowered Dispute Costs: Automating the dispute process has been proven to decrease costs without sacrificing customer service. When teamwork is established between the issuer and the merchant, lower write-offs are possible, greatly improving customer service in the process.
Benefits for Merchants
When you can be responsible for resolving the dispute directly with the customer, you are able to maintain control of the situation. This mean you can address the dispute before it becomes a chargeback, by offering a refund or issuing a credit.
Other benefits of this shared communication network include:
- Increased Efficiency: You can use your customer service team more efficiently and effectively, helping to reduce the time, energy and expense spent on chargebacks. A lot of the cost with chargebacks comes with the cumbersome dispute resolution process, when you take the issuer out of the picture, it becomes much more streamlined, less complex, less labor intensive, and shorter.
- Eliminate Chargeback Fees and Penalties: Collaboration allows for the quick resolution of disputes before chargeback fees and penalties can be imposed.
- Avoid Additional Losses of Goods and Services: Merchants rarely receive the original merchandise or service provisioned back from consumers, adding to the total amount of losses. Businesses who sell subscription services must also take into account services rendered when chargebacks occur as these non-tangible goods cannot be returned.
In successfully reducing chargebacks, merchant-issuer collaboration is a key benefit. It is beneficial to both parties to participate in a network with real-time collaboration.
When disputes are resolved efficiently and easily without negatively impacting the customer experience and before a chargeback occurs, your business comes out on top. Both you, the merchant and the issuer can and will benefit from a collaborative end-to-end solution that supports open and clear dispute and chargeback communication.