Chargeback management is a process to limit revenue loss caused by customer disputes. It includes strategies, methods, and tools to mitigate customer disputes, track evidence, and gather and evaluate data to optimize dispute win rates.
Each chargeback management tool offers different features, support levels, and technical integrations. The best choice for your business will depend on how much control you want and your budget.
What is chargeback management?
Chargeback management software refers to various services and platforms that help merchants automate chargeback prevention and contest invalid disputes. Whether they focus on preventing fraud at the source or facilitating dispute resolution, they aim to protect businesses’ bottom lines from the high cost of fraudulent claims.
Most providers of chargeback management software offer either SaaS platforms that merchants can manage themselves, managed software used by third-party chargeback managers, or hybrid solutions with aspects of both. Choosing the suitable model will depend on your specific needs and resources. For example, smaller merchants receiving fewer chargebacks may benefit more from automated alerts and simple processes than a full-blown software solution.
The best chargeback management software helps prevent and fight chargebacks by providing access to transaction and user data that can be used as evidence during the chargeback dispute process. This information can help merchants identify suspicious transactions and behavior patterns that might be fraud indicators. Chargeback management software can also track and monitor chargebacks in real-time and notify merchants of any new disputes as they arise.
The most effective chargeback management tools use a combination of prevention and interception to reduce the number of charges that reach the settlement stage and then efficiently dispute any claims that do arrive. Using the right tools can lower settlement rates, improve lifetime customer value, and mitigate fraud and other claim types of losses.
What are the benefits of chargeback management software?
The main benefit of chargeback management software is that it helps companies save money on fraud and revenue loss due to customer disputes. It also improves security, customer retention, and overall satisfaction. It can be used by any merchant that accepts credit or debit card payments online.
There are several different chargeback management tools, each implementing a unique approach to fighting and preventing them. Some offer prevention features, while others focus on interception and dispute-resolution features. Most of these solutions are SaaS, but some are fully managed and outsource all chargeback management tasks to experts who monitor and fight disputes on behalf of their clients.
To choose the best solution, consider your business’s specific needs. If you’re looking for a prevention tool, look for a product with data enrichment modules that can identify red flags such as fake email addresses and phone numbers. Some of the best solutions use machine learning to analyze digital footprints and detect suspicious behavior.
For companies at high risk for fraud, opting for a fully managed service that offers a suite of tools and services to reduce chargeback rates may make sense. These include root-cause analysis, real-time win-loss calculations, and detailed reporting. They also offer a flexible payment model that allows you to pay for the services you need when you need them.
How can chargeback management software help my business?
As more consumers embrace digital payment methods, merchant losses related to chargeback fraud have skyrocketed. But the good news: a robust chargeback management strategy, including dispute prevention and revenue recovery tactics, can help you minimize risk and recover lost profits.
Many providers offer services that help you fight chargebacks; their specific tools can vary. However, they aim to protect your business and bottom line against unauthorized chargebacks.
You can choose between SaaS or fully managed solutions depending on the software. SaaS platforms are typically more cost-efficient but require significant user input. On the other hand, fully managed software is more expensive but handles all aspects of the management process for you, so you can focus on running your business.
While the way we shop has changed, the rules and regulations set by card schemes and banks to prevent friendly fraud and fraudulent disputes have remained the same for decades. Despite these steadfast rules, fraudsters and chargeback abusers constantly evolve tactics to thwart fraud detection systems, making it difficult for merchants to prove their transactions are valid.
Ultimately, the best solution to combating unwarranted chargebacks is to partner with a company that provides the software and the expertise you need. For example, a company offers a variety of online resources like rebuttal letter templates and dispute reason codes. Still, they also provide the human intelligence required to apply those strategies effectively to your unique business.
Which chargeback management software is right for my business?
The best option for any company will depend on how it plans to integrate the tool into its current operations and how much control it wants over its chargeback management strategy. Some companies choose to use SaaS tools, which can be self-managed, while others opt for fully managed solutions, where a dedicated team of chargeback experts manages the process on behalf of the client.
Some providers also offer a hybrid solution, providing both the software and the expertise. This can be particularly beneficial for large enterprises that want to minimize customer disputes and recover revenue with minimal drain on their internal resources.
When choosing a chargeback management tool, consider the following factors:
What type of payment identification does it support? Ideally, the solution should be able to separate and flag different kinds of payments, including credit cards, prepaid cards, and gift cards. This capability will allow you to identify and correct errors that may cause future disputes or fraud incidents.
How comprehensive is fraud detection? Look for a solution that offers a variety of fraud detection options, from simple rules-based systems to advanced machine learning. Look for tools that can identify patterns in transaction history and make recommendations based on that data, as this will help prevent costly false positives.
Does the tool include all the necessary evidence to win a dispute? Look for a provider that offers all required documentation in one place, such as dispute resolution templates, chargeback reason codes, and granular reporting like recon reports and win-loss verdict reports.