7 Ways to Resolve Transaction Disputes Before They Become Chargebacks

The best customer is a happy customer. But the worst customer might be the one who files a chargeback. Within the wide, intricately differentiated spectrum between these poles lies both opportunities and dangers for merchants.

No matter how well a business is run, it is inevitable that there will be customers who dispute transactions and request to have their money returned. There are techniques and tools that merchants can use to make their customers more likely to settle these disputes in ways that do not involve a chargeback.

Customer Service

The most useful technique for steering transaction disputes away from chargebacks is a well-designed customer service infrastructure. This involves both managing consumer expectations before-the-fact and also handling disputes as they arise. Well-trained customer service representatives can convert potential chargebacks into significantly less harmful refunds or perhaps even solve issues in ways that do not involve a return of funds.

Offer Multiple Channels of Communication

This is an essential, related technique to emphasizing customer service. After all, how useful can customer service be if customers do not have any contact with your representatives? Indeed, one of the most frustrating aspects of the chargeback process for merchants is that it does not involve direct communications between consumers and merchants, limiting the opportunities to resolve the dispute by other means than chargebacks (and, potentially, chargeback disputes).

A successful customer service strategy will make use of the multiple channels of communication that are available now. Different consumers have different preferences, and it is important for merchants to reach them or allow them to reach the merchants by whatever means they prefer, whether that means e-mail, phone call, text messaging, chat platform, or some other method. As a merchant, it serves you best to make sure your consumers can contact you easily.

Be Magnanimous with Refunds

While any form of returned payment is not ideal, refunds are preferable to chargebacks. By offering refunds, you lose revenue but prevent the additional costs that come with chargebacks, such as operational costs, fees, and the consequences of having a chargeback ratio that exceeds your merchant account standards. As a result, it can often be in your best interest as a merchant to freely offer refunds when they are requested. Most refund requests are genuine and not pretext for fraud. And the ones that are fraudulent may not always be worth contesting. The time, effort, and costs spent fighting refund requests can outweigh whatever revenue may be recouped from the ones that are disingenuous.

Offer Customers Incentives to Preclude Chargebacks

People like free stuff. As a merchant, you can use this to your advantage. If you are confronted by customers who are unsatisfied, consider offering them something such as a gift card, coupons, store credit, or free merchandise. In some circumstances, you may even want to offer a refund AND free stuff. It is worth it to buy goodwill, both for the present dispute and for any future interactions with that consumer.

Develop a Reputation as a Business That Resolves Conflicts Easily

Essentially a marketing task and an amalgamation of the aforementioned techniques, it is important to make these conflict resolution techniques a part of your business’s brand. If you’ve already done the work of creating a good conflict resolution infrastructure, make sure everybody knows about it. This will assist you in future disputes, making consumers more likely to use your preferred conflict resolution techniques, and may even win you some new customers. The world is overwhelmingly complicated, and consumers appreciate merchants who make the effort resolve problems without additional complications.

Utilize Chargeback Alerts

While the previous items were techniques for resolving disputes, matters for merchants to handle themselves through policies and procedures, this are technological tools that merchants can employ to steer chargeback requests toward other outcomes. Chargeback alerts respond to chargeback requests by facilitating the exchange of information between merchant, customer, and the acquiring and issuing banks. While alerts won’t prevent every chargeback, they are still valuable, automated tools that can cut down the number of fraudulent and unnecessary chargebacks that a merchant receives.

Utilize Rapid Dispute Resolution

Rapid Dispute Resolution (RDR) is an automated tool that Verifi offers for merchants. RDR is less about trying to prevent chargebacks by resolving disputes and catching possibly fraudulent chargeback requests and more about returning the payment.

RDR works such that, when an issuing bank is set to process a chargeback, RDR prompts the acquiring bank to issue a credit to the customer rather than processing it as a chargeback. As an automated system, RDR handles these transactions without the merchant’s direct involvement, protecting the merchant from unnecessary chargebacks that slip through the cracks.

Sometimes a merchant is unable to avoid returning a payment but RDR helps ensure that those returned payments do not take the form of chargebacks. RDR and alerts can actually be used in conjunction with one another, with alerts being the first step in the process and RDR serving as a backup tool.

Next Steps

To do chargeback prevention right, you need the right services, real-time visibility into what’s going on with your chargeback activity, and a way to measure how well your chargeback prevention solutions are working. You’ll know your chargeback prevention strategy is working when your chargeback rate is going down, and your MIDs are well clear of any dangerous thresholds.

MidMetrics provides all of this: a full suite of our proprietary chargeback management tools (including Management Dashboards, In-Depth Analytics Tools, and On-Demand Reports). MidMetrics gives you a comprehensive platform for reducing your chargeback rate and monitoring your merchant accounts’ health.

Instead of trying to put together a patchwork of chargeback services from various providers—or trying to build your own setup from scratch—you can purchase them all together in one seamlessly integrated package.

MidMetrics is expertly designed to be easy to use, and it requires minimal IT effort for merchants to implement. It integrates with payment processors, gateways, CRMs, and service providers via API, and uses secure credentials to establish direct connections with card networks and banks. On the user end, MidMetrics automatically gathers and aggregates relevant data from all available sources, normalizing and presenting it in readable reports that present clear and actionable insights to merchants.

Want to see MidMetrics in action? Schedule a demo with us.