Every chargeback tells a story.
Sometimes that story is a simple one. Perhaps a merchant accidentally processed the same transaction twice, resulting in a duplicate charge to the customer's account. In most cases, however, the story is more complicated. It may involve fraud, customer service, marketing, or any combination of numerous different factors. Determining the root causes of chargebacks can be a daunting task, but it's one that's well worth the effort.
“Chargebacks not only equate to billions in lost sales every year, but when you factor in the cost to manufacture, market and ship the product, and the potential damage to merchant accounts, they could mean financial losses of 2.5 times the original transaction value,” said Suresh Dakshina, president of Chargeback Gurus.
In addition to the monetary costs, every chargeback increases a merchant's chargeback ratio. If that ratio exceeds 0.9%, it can result in additional fines and fees from the credit card networks. On top of that, if a merchant's chargeback ratio stays high for long enough, they may have their merchant account terminated.
The old-fashioned way of determining the root causes of your chargebacks involves comparing the reason code of the chargeback, which tells you what claims the customer made, to the detailed records you have on file for that transaction. Any records of past purchases or communication with the customer can also prove invaluable in this effort. Careful study of this information can help merchants infer what the root cause of the chargeback might be.
However, these days there are software tools available that can take the hard work out of chargeback analysis.
Chargeback Gurus’ Root-Cause Analyzer is a powerful solution for collecting data from chargebacks and providing analytics that reveals their causes. The tool uses artificial intelligence—supported by the insights and experience of professional chargeback analysts—to analyze more than 40 data points, detecting patterns and vulnerabilities and providing the insight necessary to prevent future chargebacks.
The Root-Cause Analyzer is available exclusively for Chargeback Gurus customers as part of its full-service suite of chargeback management tools.
In addition to these three basic types of chargebacks, merchants should be familiar with some of the more common contributing factors that can make a merchant more likely to receive chargebacks. Here are a few examples:
Analyzing chargebacks can reveal problems in these and other areas that might be hurting a merchant's business in more ways than one.
In addition to the chargebacks themselves, problems like these often lead to refunds, bad reviews, and poor customer retention. Remember, the chargebacks you receive represent only a small minority of your dissatisfied customers, most of which you will never hear from.
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