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Chargeback Prevention Alerts | 2022 FAQ

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Table of Contents

    1. What Are Chargeback Prevention Alerts?
    2. How Do Chargeback Prevention Alerts Work?
    3. How Much Do Chargeback Alerts Cost?
    4. What Are the Benefits of Chargeback Prevention Alerts?
    5. Who Are the Major Providers of Chargeback Alerts?
    6. Is Verifi or Ethoca Better for Chargeback Alerts?
    7. Is There a Difference between Verifi and Ethoca Chargeback Alert Fees?
    8. Can I Sign Up with Both Verifi and Ethoca for Chargeback Alerts?
    9. What Percentage of Chargebacks Can Be Prevented by Alerts?
    10. What Do I Need to Get Started with a Chargeback Prevention Alert Network?
    11. How Long Does It Take to Set Up Chargeback Prevention Alerts?
    12. Should I Let a Chargeback Management Company Handle Chargeback Alerts for Me?
    13. Are Chargeback Alerts the Best Way to Prevent Chargebacks?
    14. What Happens If I Get Too Many Chargebacks?
    15. What Is a High-Risk Merchant?
    16. What Happens If I am Labeled a High-Risk Merchant?
    17. What Is a Chargeback Threshold?
    18. What Happens If I Lose My Merchant Account?

What Are Chargeback Prevention Alerts?

Chargeback alerts are guaranteed to reduce chargebacks. With chargeback alerts, you receive a notification each time the consumer initiates a dispute. Upon receipt, you will have an opportunity to resolve the dispute before it becomes a chargeback.

During the chargeback process, the cardholder typically works with their issuing bank, and the merchant never knows about the dispute until they are notified about the chargeback after the fact.

But with a chargeback alert, you can get a notification of a pending chargeback in process. In this case, you get the opportunity to reach out to the customer and manage the dispute outside the payment system. This means that you can also potentially avoid a chargeback for, at most, the expense of a refund.

How Do Chargeback Prevention Alerts Work?

A prevention alert puts the chargeback process on hold and notifies the merchant about it before it reaches the point of counting against their chargeback ratio. The merchant can then choose to proactively resolve the matter by issuing a refund.

If the merchant believes the request is invalid, they can always opt to let the process play out and dispute the chargeback.

Chargeback Alert

How Much Do Chargeback Alerts Cost?

The cost of a chargeback alert is typically between $35 and $40, depending on how many alerts you receive.

What Are the Benefits of Chargeback Prevention Alerts?

The primary advantage of chargeback prevention alerts is that they allow merchants to resolve customer issues before they officially become a chargeback. By doing so, the merchants are not penalized by either the card networks or their acquiring banks.

Merchants have to pay fees for chargeback prevention alerts, but in the long term, paying those fees can be a lot more cost-effective than dealing with the expenses and lost revenue associated with having your account suspended or terminated.

Who Are the Major Providers of Chargeback Alerts?

The two major dispute resolution networks offering chargeback prevention alerts are Verifi and Ethoca. Alerts from both networks can be obtained through third-party providers like Chargeback Gurus.

Is Verifi or Ethoca Better for Chargeback Alerts?

Each company offers a somewhat different range of coverage when it comes to which banks are in their network. Verifi currently has better coverage in the United States, while Ethoca has more coverage in Canada, Europe, and Asia.

Is There a Difference between Verifi and Ethoca Chargeback Alert Fees?

Both Verifi and Ethoca charge fees when a chargeback prevention alert is issued. These fees are typically between $35 and $40, but may vary depending on quantity. In some cases, third-party providers may be able to negotiate for a reduced fee on the merchant's behalf.

Can I Sign Up with Both Verifi and Ethoca for Chargeback Alerts?

Merchants can sign up with both Verifi and Ethoca to get the widest alert coverage. However this will result in duplicate fees when a bank is in both networks. Merchants can sign up for each network individually or obtain both through a single third-party provider.

What Percentage of Chargebacks Can Be Prevented by Alerts?

The percent of chargebacks prevented by alerts will vary based on:
  • Transaction Count (The more transactions, the better the coverage)
  • Customer Bank Location (US customer base has better coverage than overseas)
  • Years in Business (Established businesses can have better coverage than new merchants)
Here are some estimates based on our own internal data analysis:

Service/Product

Verifi

Ethoca

Physical Goods

21%

17%

Digital Goods

41%

30%

Digital Service

17%

33%

Subscription Industry

19%

14%

 

What Do I Need to Get Started with a Chargeback Prevention Alert Network?

To get your merchant accounts enrolled in the prevention alert network, you need to provide the following information:
  • Merchant/Business Name
  • Business Registered Address
  • Merchant Account Descriptor (Name as it appears on customer credit card statement)
  • Merchant Account Number (The ID provided by your payment processor)
  • Access to your Sales System (To issue refunds and resolve the alerts)

How Long Does It Take to Set Up Chargeback Prevention Alerts?

  • New Merchant: 45 – 60 days (Haven’t processed any transactions before)
  • New Customer: 20 – 30 days (Never enrolled in a prevention alert network before)
  • Existing Customer: No delay (Previously enrolled in prevention alerts, but switching providers)

Should I Let a Chargeback Management Company Handle Chargeback Alerts for Me?

Working with a chargeback management company who is an authorized reseller of Verifi and Ethoca prevention alert programs means that you have the coverage of both Verifi and Ethoca. You also get a dedicated team that responds to chargeback prevention alerts within the required time.

This way you never have to worry about failing to respond in time—whereas, when a merchant signs up for alerts directly with the networks, the burden of resolving the alerts falls on the merchant.

Some chargeback management companies offer the ability to manage alerts from both networks through a single intuitive dashboard instead of logging into each company's portal separately.

A chargeback management company may even offer a 100% chargeback prevention guarantee when a prevention alert is handled. This means if chargeback still occurs after the merchant responded to the alert by issuing a refund, the management company will refund 100% of your alert fee. Lastly, a chargeback management company may charge the same fee you'd get by enrolling with the network directly.

Are Chargeback Alerts the Best Way to Prevent Chargebacks?

Chargeback alerts can be expensive, but for merchants in high-risk industries or those in danger of exceeding at 1% chargeback ratio, the cost is well worth it. In most cases, however, alerts should be used in combination with other methods such as root cause analysis.

What Happens If I Get Too Many Chargebacks?

The biggest credit card networks—Visa, MasterCard, and American Express—track your merchant chargeback ratio. If your chargeback ratio crosses a predefined threshold, your business will be deemed "high-risk".

Businesses labeled as high high risk are typically enrolled in dispute mitigation programs that may impose additional fees for chargebacks. If a merchant remains in such a program for too long, large monthly fees may be added, and the merchant's acquirer may choose to terminate the merchant account.

When this occurs, the merchant is added to the Terminated Merchant File (TMF), which makes it challenging to get a merchant account from any other payment processor.

What Is a High-Risk Merchant?

When a merchant operates in a high-risk industry or has too many incidents of fraud or chargebacks, they can be labeled as high risk. High-risk merchants may have limits placed on their accounts, and they may be enrolled in monitoring programs by card networks.

What Happens If I am Labeled a High-Risk Merchant?

Consequences of being labeled high risk can include limits on monthly processing volume, holding reserve funds (to protect themselves from loss), and possibly even termination of the merchant account.

If a merchant has been designated as high risk due to a high chargeback ratio rather than because of the industry they operate in, this high risk status can be removed by maintaining a chargeback ratio below the threshold for a few months.

What Is a Chargeback Threshold?

Card networks typically impose consequences when a merchant’s chargeback ratio exceeds 1%, or 0.9% for Visa. Acquirers and processors may also have their own thresholds merchants must not exceed.

What Happens If I Lose My Merchant Account?

Businesses that lose their merchant accounts due to bad chargeback ratios may have difficulty opening an account with a new acquiring bank, leaving no alternative but to go with a costly, "high-risk" payment processor. You can safeguard your account by making use of chargeback prevention alerts.

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