Comparing Chargeback Services

Table of Contents

  1. What are chargeback services?
  2. Do I need professional chargeback services?
  3. What are the pros and cons of hiring a chargeback services company?
  4. How to choose a chargeback management company
  5. What kinds of services do chargeback management companies offer?
  6. How does the chargeback process work?
  7. What are the three sources of chargebacks?

Dealing with chargebacks can take a heavy toll on merchants. Fighting them takes time, research, and labor, and sometimes you still end up losing money to fraudulent or improper chargebacks.

When trying to get a chargeback reversed, the burden of proof is on the merchant, and issuing banks sometimes take a lot of convincing to decide against their customers. While fighting chargebacks can recover valuable revenue, that alone will never be enough to effectively deal with a chargeback problem, even if you could win every time. 

Chargebacks that are reversed still count against your chargeback ratio, and letting that get too high can result in severe consequences from both card networks and banks.

Every merchant who receives chargebacks should have a comprehensive strategy for dealing with them that includes both prevention and recovery.

Some companies may have the resources and expertise to handle this in-house, but for most merchants, that's just not feasible. That's where chargeback services come in.

What are chargeback services?

Chargeback services providers help merchants to recover revenue lost to chargebacks and to prevent future chargebacks from occurring. Some providers go above and beyond the most basic services to provide tools and advice for analyzing the causes of chargebacks, improving customer service, and more.

Chargeback management is a skill that’s becoming ever more valuable in the modern business world, and even many major corporations are discovering that hiring professionals to deal with their chargebacks is a more effective and efficient solution than trying to handle them in-house.

Hiring a third-party chargeback management company to deal with chargebacks on your behalf is often an effective way to alleviate the pain of chargebacks, but not every company will give you great value for your money and a positive return on investment.

Let’s go over the pros and cons of professional chargeback services and how to find the right company to partner with.

Do I need professional chargeback services?

Every business is different, but any merchant who deals with chargebacks on a regular basis would be wise to consider hiring professionals. Merchants with high-risk MCCs, eCommerce merchants, and those in danger of exceeding chargeback thresholds will see the greatest benefit from professional chargeback services.

New call-to-actionSmaller merchants who sell straightforward, low-value products in a card-present environment tend to see the least benefit from chargeback management, since they receive fewer chargebacks in the first place. Each case is unique, however, and merchants would do well to determine how much money they’re losing to chargebacks to know how much they might stand to gain from hiring a professional service.

What are the pros and cons of hiring a chargeback services company?

The first downside is cost. If you own a very small operation, you might consider handling chargebacks yourself, or you might have staff to whom you can delegate the responsibility. Either way, it's likely to be cheaper than hiring professionals to do it.

On the other hand, it's easy to overestimate your own ability to navigate complex matters like chargeback representation, and when you're short on time and manpower, the deadlines for responding to chargebacks can slip right by.

The other potential downside is data security. Opening up your books to a third party carries some risks with it, and a breach that compromises customer data can be devastating to a small business's reputation. This risk can be mitigated by choosing a company with a sterling reputation and comprehensive security.

Outsourced chargeback management has some obvious advantages as well, the primary one being expertise.

Their entire business is dealing with chargebacks, so you can be sure they're up to date on the latest rules and regulations and know all the nuances of chargeback representment, including how different issuing banks evaluate evidence.

That means they’ll win more often when fighting chargebacks, recovering more revenue than an in-house team typically would.

They're also likely to have access to dedicated software and reporting systems that not only help them fight chargebacks more effectively but enable them to identify root causes and prevent chargebacks from happening in the first place.

The benefits of hiring a high-quality chargeback management company may become more apparent when you consider the true cost of chargebacks. It's not just the amount of the transaction you have to worry about — when you factor in all the fees and overhead costs, a chargeback can end up costing you more than twice the disputed amount.

How to choose a chargeback management company

The main risk to hiring an outside company is that you'll unknowingly choose one that isn’t very good. If a chargeback management company isn't winning disputes at a high rate, you're just throwing good money after bad, spending more than you're saving.

Learn How To Fight Them The Smart WayWhen you're feeling out a chargeback management company to see if they'd be a good fit for your business, it's important to ask the right questions. Here are a few things to think about when you're deciding whether to hire a particular company:

Do they understand your business?

If you're an unusual or specialized type of merchant, the expectations around your products may be different. It's important that any company you hire understands the particular challenges your business faces.

How good is their reporting?

All reports are not created equal. You need a company that will provide you with real-time reporting designed to help you identify the root causes of your chargebacks. Any company that's focused on representment at the expense of prevention is not serving you well.

What's the setup process like?

A weeks-long onboarding process is a red flag — you want a company that offers a streamlined setup process that will quickly get to work reducing your chargebacks. Watch out for setup fees and contracts, too. A company that's confident in their ability to deliver results should be fine with a monthly fee schedule.

Do they offer security and performance guarantees?

Any worthwhile company should be able to estimate what sort of results you can expect: how many chargebacks they can prevent in an average month, how much money they recover for their clients, etc. Performance and response time guarantees incentivize them to work hard for you, so look for companies that offer those. They should be able to provide information and assurances about how they handle data security, too.

How transparent is their billing?

Any charges you incur from your chargeback management company should be clear and understandable. There shouldn't be any fees or charges that come as a surprise to you — make sure it's all laid out in advance.

Don't rush into choosing a chargeback management company. Take the time to find the right partner for your particular business needs, one who understands the challenges you're facing and can offer strategies and solutions to deal with the root causes of chargebacks and competently fight the ones that slip through anyway.


What kinds of services do chargeback management companies offer?

Many chargeback management companies will offer prevention services, representment and recovery services, analytics driven by AI, alert monitoring services, and expert support for your fraud prevention efforts.

How does the chargeback process work?

When a cardholder disputes a charge, their issuing bank forces a debit of the merchant’s bank account and returns the money to the cardholder. At that point, the merchant must dispute the chargeback in a process called representment if they want to recover the funds.

What are the three sources of chargebacks?

The three sources of chargebacks are true fraud, friendly fraud, and merchant error.

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