The chargeback process involves many steps, and can vary slightly depending on which banks and card networks are involved. The parties involved are the cardholder, the cardholder’s issuing bank, the merchant, and the merchant’s acquiring bank. If the merchant has hired a chargeback representment firm, they will be involved as well.

Here’s how the basic chargeback process works:

Most Common Causes of Chargebacks

There are hundreds of scenarios that might lead to a cardholder dispute, but most chargebacks occur for predictable reasons.

When it comes to legitimate chargebacks, true fraud represents the largest single category. Roughly 30% of all chargebacks involve claims of stolen credit card information, and these claims are far more common in e-commerce. The introduction of the EMV chip—and the shift in liability that motivated its adoption—has made card-present fraud much more difficult.

Fulfilment issues are another major cause of chargebacks, with customers claiming their order never arrived in 24% of disputes and claiming the wrong product was delivered in 15%. In theory, these should only be valid chargebacks if the merchant refused to resolve them. Unfortunately, however, cardholders aren’t always honest with their banks when requesting a chargeback, and the reasons they give for disputing a charge can’t always be trusted.

The alarming truth is that more than three quarters of all chargebacks filed may be attributable to friendly fraud. Many instances of friendly fraud are deliberate attempts at obtaining goods for free, but friendly fraud can also occur because of confusing merchant descriptors, difficult cancellation processes for subscription services, defective products, and long delays in processing refunds.

Another frequent cause of chargebacks is affiliate fraud. When merchants enter into affiliate marketing programs and don’t vet their affiliates, unethical affiliates may post false charges to boost their income before cashing out, leaving the merchant stuck with the chargebacks before they even notice what’s happening. In some industries, as many as 10 to 60% of chargebacks may be affiliate-related.

Finally, beware of poor customer service. Understaffing, long hold times, slow email response, and inefficient operations can prevent customers from resolving their issues directly with you, leading them to opt for the chargeback process as the faster alternative. Unsatisfactory customer service can be an underlying root cause for 10 to 30% of all chargebacks.

Chargeback Representment and Prevention

Just as cardholders have the right to dispute invalid charges, merchants have the right to dispute illegitimate chargebacks. When a merchant knows that they have met their obligation to the customer, delivered the goods and services that were purchased, and upheld the terms of their sale agreement—and, most crucially, have proof of all this—they can fight the chargeback and recover their lost revenue. This process is called chargeback representment.

Here’s what the chargeback representment process looks like:

Can all chargebacks be prevented?

No merchant has discovered the secret to avoiding all fraud and human error, so chargebacks will never be 100% preventable. However, by employing a chargeback strategy informed by experience, analysis, and tested methodologies, you can minimize preventable chargebacks and devote the majority of your chargeback management efforts to fighting friendly fraud. Every merchant is unique, and it can be helpful to work with a chargeback management firm to determine your specific vulnerabilities and root causes.

However, there are some universal tips for avoiding disputes:

The state of chargebacks is always in motion. Technology changes, fraudsters adapt and evolve, card networks hand down new rules and regulations, and the cycle repeats. When chargebacks are getting the best of you, it helps to have expert assistance at your side to walk you through the changes, analyze your raw data, and help you come up with policies and tactics that strike at the root of your problems. With the right strategy, the right tools, and the right team supporting you, you can win back the revenue you’ve been losing to chargebacks, protect your merchant account, and focus on doing what merchants do best—making customers happy.

With the right strategy, the right tools, and the right team supporting you, you can win back the revenue you’ve been losing.

About Chargeback Gurus

About Chargeback Gurus www.chargebackgurus.com

Chargeback Gurus helps your business protect and recover more lost revenue by providing innovative chargeback management solutions, leveraging AI, data science, advanced analytics and deep industry expertise.

By understanding our clients’ needs and fully aligning with their goals, we help them reduce chargebacks and increase recovery rates to maximize revenue. Our technology solutions combine powerful data science with deep industry expertise to deliver hundreds of millions of dollars in recovered revenue to our clients.

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