Made Simple - Identify Root Causes & Prevent Chargebacks

There are many ways to fight and prevent chargebacks, but one of the strongest weapons you have against them is analysis. The better you are able to understand the causes and sources of your chargebacks, the better you will be able to make adjustments to your policies and business practices to eliminate them. 

Manage Chargeback In-House Or OutshoreWhile there are countless potential root causes for chargebacks, it's not too difficult to develop analytical habits that can help you identify and correct them. Here are some simple steps you can follow to learn how to preemptively stop many of your chargebacks from happening.

Every Chargeback Has A Story

Chargebacks aren't random acts of nature that come out of nowhere. Chargebacks happen for reasons, and merchants can learn a lot about the chargebacks they're incurring when they take the time to analyze them deeper.

To analyze chargebacks, you need to look at their data, and that's always easier when the data is collated into reports.

Clear, concise reporting is your best ally where chargeback analytics are concerned.

What data do you want to look at? The originating source of any chargeback is a customer, so customer data is the place to start. You want to know:

  • What product or service they bought
  • How the transaction was carried out
  • How the product was shipped to them
  • What interactions took place between the merchant and customer
  • How the product was marketed
  • Who provided customer service to the customer
  • What was the customer's impression of the product when they received it?

Even for a small transaction, there can be a great deal of accompanying customer data. Aside from that, you can also gather data from your payment processor, your payment gateway system, and your customer relationship management platform

Actionable Chargeback Analytics

Analysis doesn't accomplish much unless you use what you learn to make improvements to your business. When you've collected all the data you can and organized it into readable reports, you can analyze it to identify patterns in the chargebacks you receive.

When you can see repeated instances of the same types of chargebacks happening over and over, you have an identifiable problem and an opportunity to fix it.

New call-to-actionYour objective must be to determine the root causes of your chargebacks. When you can group all similar chargebacks over a three to six-month period together, patterns should start to become apparent, and you can see the aspects of your business that need to be addressed.

Possible Areas of Concern

There are various areas of business operations where problems or inefficiencies can lead to spikes in chargebacks. Here are some of the more common ones:

  • Marketing. Are you getting chargebacks because customers are disappointed that your products aren't satisfactory? Your marketing team may be setting unrealistic expectations.
  • Customer Service. How much contact do customers typically have with your company before they file a chargeback? Are they unable to reach you easily? Better, more accessible customer service may be the solution here.
  • Referral Traffic. Are many of your chargebacks coming from sales you can source to a particular traffic provider? It may be time to reconsider that relationship.
  • Salespeople. If your sales team is pressuring customers into making purchases that they later regret, they might need to be trained to take a different approach.
  • Manufacturing. Low-cost offshore manufacturers sometimes produce low-quality goods, which can lead to customer dissatisfaction and chargebacks.

Other areas to look into include fulfillment procedures, your refund policy, other terms and conditions, and the methods by which you accept payment. A close analysis of the root causes of your chargebacks should show you what to focus on.

In our experience, about 35% of chargebacks can be traced to a merchant's internal issues.

Best Chargeback Analysis Approach

You have two real options when it comes to conducting a root cause analysis: a dedicated in-house team, or a third-party company.

You can save money by doing the analysis in-house, but you may lack the software, free time, and chargeback-related experience that can help you pick out some of the patterns.

A third-party company will have the software and expertise, and they can generally provide fast turnaround as well as expert advice for how to follow up on the results of their analysis.

But it's very important to choose a good company that doesn't overcharge for their services.

Analyzing the root causes of chargebacks is crucial. The best chargebacks, after all, are the ones you can prevent before they happen—they don't cost you any money at all.

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