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.
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:
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
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.
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:
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.
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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