Chargeback Reversal Tips

Table of Contents

  1. What Is a Chargeback Reversal?
  2. Always Analyze the Reason for Chargebacks
  3. Keep Excellent Transaction Documentation
  4. Make Sure Your Representment Evidence Is Compelling
  5. Hire Chargeback Management Professionals
  6. Can a Chargeback Be Reversed?
  7. What’s the Difference Between a Reversal and a Refund?
  8. How Long Does a Transaction Reversal Take?

Chargeback management is never a simple task. In order to do it effectively, merchants must maintain thorough records, collect and analyze data, make use of a variety of available tools, and often change how their businesses operate. One of the trickiest parts of chargeback management is representment, the process through which merchants can fight disputes and recover their lost revenue.

More and more merchants are discovering that fighting and reversing chargebacks can be an effective way to limit revenue loss, especially if their industry or business model is especially prone to friendly fraud. Unfortunately, many merchants also have very low success rates in representment. An effective representment strategy typically results in a win rate between 65% and 75%, but some merchants would feel lucky to reach even half that. To help out, let's go over four basic tips merchants can use to get more chargeback reversals.

What Is a Chargeback Reversal?

A chargeback reversal is when the issuing bank, after examining the evidence, decides to reverse the chargeback and return the funds to the merchant.

When a customer contacts their bank to dispute a charge, the bank asks a few questions to gather information about the transaction and the reason for the dispute, then decides to either file a chargeback or reject the dispute.

While there are specific reason codes a dispute must fall under in order to be eligible for a chargeback, banks will usually err on the side of the customer if there's any room for interpretation. If the bank decides to file a chargeback, they will notify the merchant through their acquirer.

Once the merchant is notified of the chargeback, they can look at their records of the transaction to see if the reason code for the chargeback is accurate. For example, if the reason code indicates that the product wasn't received and the merchant finds that the order was never shipped out, it's best to accept the chargeback. If the customer is claiming something that isn't true, however, the merchant should fight the chargeback through representment.

During this process, the merchant gathers information regarding the transaction, including receipts, delivery confirmations, authorization notes, and anything else that can show the issuing bank the transaction was legitimate. They submit this evidence to the issuing bank, and the bank decides to either uphold or reverse the chargeback.

Learn How To Fight Them The Smart WayNote that even if the chargeback is reversed, the merchant is still responsible for paying the chargeback fee, and the transaction will still count against the merchant's chargeback ratio.

Those who let their chargeback ratio climb above 0.9% can face serious consequences, up to and including the termination of their merchant account. Chargeback representment is still a valuable tool for recovering revenue and discouraging fraudulent chargebacks, however.

Merchants should always fight friendly fraud chargebacks. When a customer files a chargeback after they made an authorized purchase and got what they paid for, they shouldn't be entitled to your hard-earned revenue. Not only does fighting these chargeback benefit the individual merchant, but it also helps discourage friendly fraud in general. One of the reasons this kind of fraud has become so common is that merchants who don't fight chargebacks make it easy to get away with it.

Always Analyze the Reason for Chargebacks

It's important to know why a customer filed a chargeback. The reason code for the chargeback can be entered into our lookup tool for information on what claims the customer made when disputing the charge. Keep in mind, however, that the reason code only tells you the reason the customer gave the bank, which may or may not be their real reason for disputing the charge.

Look up the transaction in your Customer Relationship Management (CRM) software and see if you have made any notes about that purchase or the customer who made it.

Did the customer make any attempt to contact you? Check your records for any communication between your business and the customer in question. If the customer did contact you, find out what issue they had and how your team addressed it.

Locate your records of the order and review any of the following information that applies:

  • What did the customer order?
  • What was the shipping address? Was it the same as the billing address or any previous orders from that customer?
  • Do you have confirmation that the order was delivered?

Take initiative and communicate with the customer. Call the customer to find out what exactly happened and why they are unhappy. Once a chargeback has been filed it's too late to prevent it by issuing a refund, but you may be able to gain some insight to prevent future issues.

For example, you might contact a customer who filed a chargeback and learn that they thought the product they received was counterfeit. Therefore, they went straight to their bank rather than trying to get a refund from a merchant they felt had deceived them. Upon investigating their issue, you might find that one of your suppliers is having quality control issues you weren't aware of, which can be corrected to prevent further chargebacks.

Keep Excellent Transaction Documentation

Demonstrating that you behaved reasonably in all your dealings with the customer and fulfilled your end of the sales agreement is a crucial part of winning a chargeback reversal.

As part of your representment package, the bank will require a rebuttal letter explaining what exactly happened in the transaction, whether the customer contacted you, any steps you took to resolve the issue, and why you're contesting the chargeback.

This letter lays out the merchant's case for reversing the chargeback. It includes the reason code for the chargeback, all the evidence presented, and how that evidence demonstrates that the reason code provided is inaccurate.

In order to have this evidence, of course, you'll need to have detailed records. These should include thorough documentation of the transaction itself, including the results of any fraud prevention checks or customer authentication methods. You should also have records of any communication with the customer, as well as information specific to the product or service, such as shipping and delivery, records of customer logins and access, or proof that the service was completed.

Make Sure Your Representment Evidence Is Compelling

Compelling evidence will be a key element in any chargeback case.

Keep all your sales receipts filed. If you receive a written complaint, make sure you keep a copy of the letter you receive from the customer together with a copy of your reply and any original sales documentation, such as invoices, receipts, and guarantees.

If the communication occurs in person or over the phone, make a record of the conversation. Record the date and time of the encounter, the names of those involved, and an accurate summary of the conversation. If you arrived at an agreement with the customer, record that information.

When putting together your representment, include a copy of the invoice, delivery confirmation, refund policy, product shipment/tracking information and any customer service notes.

If your CRM shows that the billing and shipping addresses of the customer match, file the AVS match also. Make sure that the reference number for the chargeback dispute is displayed on all documents.

Upload the documents online or fax them to the bank. After 7 to 10 business days, follow up with the bank regarding the status of the chargeback dispute.

After the dispute process is complete, make sure to blacklist the customer who filed the dispute in your system to prevent future chargebacks. Most customers who dispute one charge will go on to dispute more.

Hire Chargeback Management Professionals

If you want to maximize your success in getting chargebacks reversed, the best way to do that is to bring in a team of experts. Hire a chargeback management company to win chargeback disputes for you so you can focus on growing your business.

A good chargeback management Manage Chargeback In-House Or Outshorefirm will have an enormous amount of chargeback data they've analyzed, allowing them to customize each representment package to meet the expectations of individual issuing banks. That helps them achieve a significantly higher win rate than most in-house teams.

Partnering with a reputable chargeback management company can help you recover your lost revenue and maintain the reputation of your business.


Can a Chargeback Be Reversed?

A chargeback can be reversed if the merchant can provide a compelling dispute package to the issuing bank to show that the transaction was legitimate.

What’s the Difference Between a Reversal and a Refund?

A refund is when a merchant refunds the cost of a transaction directly to the customer. A reversal is when the customer disputes the transaction with their bank and the bank reverses the charge.

How Long Does a Transaction Reversal Take?

A transaction reversal takes 1-3 days, depending on the issuing bank.

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