Chargebacks are a dreaded headache for merchants across all industries. These not only impact your bottom line but also your reputation with financial institutions and customers.
The good news? You can prevent up to 99% of disputes in the first place by harnessing the power of chargeback alerts, like those provided by Ethoca and Verifi.
Let’s first start by understanding what chargebacks are, and why they matter.
What are Chargebacks?
Chargebacks are when a customer disputes a charge on their credit card, asking their bank to reverse the payment. This can happen for many reasons, like fraud, receiving the wrong product, or not getting an order at all. For merchants, chargebacks can be costly, leading to lost revenue and additional fees.
They don’t just affect profits, though. Too many chargebacks can harm your reputation with banks and payment processors, sometimes even leading to account termination. But with the right steps in place, like using chargeback alerts, you can catch disputes early and avoid most of these problems. Staying ahead of chargebacks helps protect your business and keeps things running smoothly.
How Chargebacks Negatively Affect Your Business
Chargebacks are more than just a lost sale. They can have a ripple effect that harms your business in multiple ways:
- Lost Revenue: When a chargeback is filed, the transaction amount is immediately withdrawn from your account, which means you lose the sale. On top of that, you may also lose the product or service that was provided to the customer.
- Chargeback Fees: Each chargeback comes with additional fees that add to the cost of the dispute. These fees can range from $20 to $100 per chargeback, eating into your profits even more.
- Higher Processing Fees: When chargebacks pile up, payment processors see your business as a higher risk. This often leads to increased transaction fees or worse, termination of your account.
- Reputational Damage: Frequent chargebacks can damage your reputation, not just with banks and payment processors, but with potential customers who may be hesitant to trust your business.
- Time and Resources: Disputing a chargeback is a time-consuming process that requires gathering evidence, documentation, and responding within strict deadlines. This diverts your attention from running your business and can cost you valuable resources.
Managing chargebacks effectively is key to protecting your revenue and reputation. Using chargeback prevention tools like Disputifier can help automate the process and reduce the number of disputes you face.
How Chargeback Alerts Protect Your Business
Chargeback alerts are a vital tool, giving merchants a chance to resolve disputes before they become chargebacks. Let’s break down how they benefit your business.
1. Immediate Action to Prevent Losses
Chargeback alerts give merchants a crucial window to either issue a refund or engage with the customer before the dispute escalates into a chargeback. Early intervention avoids financial loss, including the transaction amount and any associated fees, which can range from $20 to $100 per chargeback.
By acting fast, merchants can also avoid the hassle of shipping products that may be returned or lost in the dispute process, saving on restocking fees and shipment costs.
2. Strengthening Customer Relationships
Chargebacks aren’t always the result of fraud; many disputes stem from customer dissatisfaction or misunderstandings. Chargeback alerts allow merchants to step in early, resolving the issue directly with the customer. This can transform a negative experience into a positive one, boosting customer loyalty and trust.
3. Protecting Your Merchant Account and Reducing Fees
Chargeback alerts play a crucial role in maintaining a healthy chargeback ratio. A high chargeback ratio can lead to increased processing fees, extra scrutiny from payment processors, or even termination of your merchant account.
There are 2 main chargeback alerts systems…
The Different Types of Chargeback Prevention Alerts
When it comes to chargeback alerts, merchants mainly rely on two industry-leading systems: Verifi and Ethoca. These services act as early warning systems, notifying merchants of pending disputes and giving them a window to resolve issues before they become chargebacks. Let’s explore how each one works.
Verifi Alerts
Verifi, a Visa-owned service, offers two programs: Cardholder Dispute Resolution Network (CDRN) and Rapid Dispute Resolution (RDR). Both help merchants intervene before a chargeback is finalized.
- CDRN: Merchants are directly notified of disputes and can issue a refund or allow the chargeback to proceed, giving them control over the resolution.
- RDR: A more automated approach, RDR lets merchants set rules to automatically refund specific disputes (like those below a certain dollar amount). This hands-off system resolves issues instantly without merchant intervention, saving time and reducing operational costs.
Verifi's pricing is based on a merchant's risk level, determined by the Merchant Category Code (MCC). Higher risk equals higher costs, with most businesses falling into tier 1 or 2.
Ethoca Alerts
Mastercard’s Ethoca provides early alerts for chargebacks, similar to Verifi. Once notified of a pending chargeback, merchants can decide to refund the transaction to avoid a formal chargeback.
One of Ethoca’s key benefits is the fast setup—merchants can begin receiving alerts within 24 hours. Like Verifi, merchants can choose to automate refunds for specific types of disputes or handle them manually.
Do You Need Both Verifi and Ethoca?
Using both Verifi and Ethoca gives merchants comprehensive coverage across Visa and Mastercard networks. Together, they can reduce chargebacks by up to 80%, as most U.S. banks are connected to one or both services. This dual-layer protection ensures that merchants receive early dispute notifications, minimizing financial loss and business disruption.
Prevent Chargebacks and Enjoy Peace of Mind with Disputifier's Alerting System
Ready to take charge of chargeback prevention? Integrating Disputifier into your fraud and dispute management system is seamless and highly effective. Disputifier is trusted by merchants for its proven track record of preventing up to 99% of disputes, offering you both protection and peace of mind.
Our advanced alerting system leverages Ethoca and Verifi alerts to catch potential disputes before they escalate. With Disputifier, you get the best of both systems, ensuring accurate, real-time insights with minimal risk of false positives.
Real-Time Monitoring
Disputifier continuously scans and evaluates every transaction, looking for red flags like unusual spending patterns, suspicious geographic activity, or known fraud markers. This gives you immediate insights into risky transactions, allowing you to take swift action.
Automated Alerts
When Disputifier detects an issue, you’re instantly alerted. These detailed alerts include all the necessary information about the transaction, giving you the option to respond quickly—whether that’s issuing a refund, pausing shipment, or reaching out to the customer for clarification.
Customization
Disputifier lets you customize alert parameters to suit your business needs. Tailor your alerts based on risk factors like transaction amount, location, or payment method. This ensures you’re only alerted to the disputes that matter, saving you from unnecessary interruptions.
And if a chargeback does slip through, Disputifier fights it for you. The platform automatically generates a tailored, data-driven response based on hundreds of key factors, submitting the dispute directly to the bank or card issuer.
Continuous Optimization
Disputifier doesn’t stop there. With ongoing A/B testing, our system optimizes responses over time, refining strategies for even higher success rates. Merchants using Disputifier enjoy win rates as high as 70%, compared to the industry average of just 10-30%.
The best part? You only pay when we increase your win rate. You’ve got nothing to lose and everything to gain. Start your free trial today and experience the Disputifier difference!
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