How Fighting Chargebacks Gives You A Competitive Edge
When we talk about chargebacks, one thing that we frequently emphasize is that the cost of chargebacks goes far beyond just the dollar amount of the disputed transaction. Aside from the other direct costs, like bank fees and the time and money you spend dealing with chargebacks, they also come with downsides that are harder to quantify, like the fact that exceeding your chargeback threshold can cause you to lose your merchant account. It’s very difficult to see any silver lining to chargebacks—but that doesn’t mean there aren’t any.
Investigating and fighting chargebacks can actually help give you an edge over your competitors by revealing opportunities to improve your business operations and boost your profits. Not all of your competitors have the resources or will to fight chargebacks—many of them will simply write it off as the cost of doing business. When you take the time to investigate every chargeback, dispute illegitimate ones, and take steps to address their root causes, you can gain valuable insights and develop improved procedures that will help your business thrive in the long term.
Every Chargeback Tells A Story
Chargebacks don’t just happen at random. There’s a story behind every chargeback you receive, and investigating chargebacks give you the opportunity to examine these stories and discover what is making your customers unhappy. When you successfully fight illegitimate chargebacks and analyze the root causes, you not only get to hold on to your revenue, you also get valuable insights into the things that are frustrating your customers or failing to satisfy them.
Analyzing chargebacks helps you identify vulnerabilities and inefficiencies in your business. If customers are requesting chargebacks because your products aren’t meeting their expectations, that may indicate that your sales and marketing departments are engaging in misleading practices or making promises that you aren’t able to fulfill—or they could be an early warning of serious product quality issues. Chargebacks that result from customers’ difficulties with exchanging or returning a defective product may be a sign that your return policy needs to be improved.
Analyzing Chargeback Root Causes Benefits You
Not every chargeback can be successfully disputed, but each chargeback you analyze can provide you with opportunities to improve your business practices. Even when you fight “friendly fraud” and other illegitimate chargebacks, you’re helping to strengthen your business. Not only will you likely get your money back, but you’ll also send a message to fraudsters that you’re not an easy mark.
Fraudsters are opportunists; they target companies that are easy to exploit. Fighting back against these chargebacks will stop repeat offenders from going after you.
The other reason to fight chargebacks is that explicitly acknowledging them is required under Visa’s new mandate, with penalties up to $2.50 for non-acknowledged chargebacks. Since you’re required to take action in response to each chargeback regardless of whether you expect them to be valid or not, there’s no reason not to dispute illegitimate chargebacks—while your competitors who take a less proactive approach lose money and miss out on opportunities to improve their business practices.
Remember that chargebacks aren’t just telling you about the experience of the customers who filed them. We estimate that for every customer who takes the time to file a chargeback, ten more customers have had the same bad experience—but instead of providing feedback via the chargeback process, they just give up on your company and shop elsewhere.
Investigating & fighting chargebacks helps you gain insights into these silent customers and what might be making them unhappy enough to leave. When you write chargebacks off as just another cost of doing business, you’re writing these customers off as well.
When you instead take the time to study and analyze your chargeback triggers—the aspects of your products, policies, or business practices that are causing your customers to feel unsatisfied or misled—you can fix them. By seeing each chargeback as a chance to learn more about your customers’ interactions with your company, you can improve your operations, retain more customers, and establish better relations with them. That sets you on a path to increase your profits and expand your business. Your competitors who don’t bother with fighting chargebacks or learning from them are just leaving valuable opportunities for improvement and growth on the table.