Chargeback Management

Chargeback Services: Choosing the best services provider

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

The burden of proof is on merchants to demonstrate the problems with a wrongful chargeback. Even a completely passive approach is unworkable—get hit with too many chargebacks, and you risk having your merchant account suspended.

Every merchant needs some kind of strategy for preventing, fighting, and dealing with chargebacks. Some businesses may have the resources and wherewithal to handle it in-house, but for many merchants, that's just not feasible. That's where chargeback services come in to play.

What are chargeback services?

Chargeback services providers help merchants to recover revenue lost to chargebacks and prevent future revenue from being lost in a similar way. Some providers go above and beyond basic services and help your business to retain customers, as well as chargeback revenue.

Hiring a third-party chargeback management company to deal with them on your behalf is one way to alleviate some of the pain of chargebacks, but not every company will give you a good value for your money.

If you're thinking of hiring a chargeback services company to take on your chargebacks for you, here's what you need to know.


Do I need chargeback services?

In order to decide, you'll need to weigh the benefits and risks. There are several advantages to keeping chargeback management in-house.
The first is cost—if you own a 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.
The other consideration 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.
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.

What are the benefits and risks of a chargeback services company?

Outsourced chargeback management has some obvious advantages as well, the primary one being expertise.
Their entire business is about chargebacks—you can be sure they're up to date on the latest rules and regulations and know all the nuances of chargeback representment.
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 easily and prevent chargebacks from happening in the first place.
The main risk to hiring an outside company is that you'll get one that isn't very good and doesn't provide a good return on your investment. 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.
However, the cost of 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 in dispute—when you factor in all the fees and overhead costs, a chargeback can end up costing you double the actual disputed amount.

How to pick a Chargeback Services/Management Company?

When 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 inquire 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 is the setup process like? A weeks-long on-boarding 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. 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.

Download the eGuide, 4 Reasons to Hire a Chargeback Management Company