Chargeback Management Software: 10 Key Questions to Ask Providers
By Brian Radford on May 8, 2020
Merchants cannot afford to ignore the threat chargebacks pose to their bottom line. It may be easy to write them off as a cost of doing business when you’re just looking at the dollar amounts on your bank statement, but that’s not the real cost of a chargeback. When you factor in all of the overhead that went into marketing and selling the product, plus the chargeback fees from your payment processor, the merchant’s final price tag can be up to three times the amount of the transaction. On $1,000 worth of chargebacks, that’s $3,000 of your hard-earned dollars gone for good.
Another thing about chargebacks: your payment processor isn’t just charging you fees for them; they’re also keeping score. There’s an upper limit to how many chargebacks you can get hit with (usually a 1% chargeback/transaction rate or over 100 chargebacks in a single month). If your chargeback problem gets out of hand for too long, you can lose your account—or even get blacklisted by the card networks from opening any merchant accounts for five years.
It’s essential for merchants to prioritize fighting and preventing chargebacks, especially the growing number of merchants who rely exclusively on card and digital payments. Chargeback management software can be an effective way to protect yourself if you know how to choose your business’s best provider.
Finding the Right Chargeback Management Software
Resolving chargebacks can be a tough process for merchants to navigate. Fighting them means knowing which ones you can fight, how to fight them, and then overseeing that whole process from start to finish. To prevent them from happening in the first place, you must know why you’re getting them, and that means analyzing large amounts of chargeback data.
Very few merchants have the time or resources to become chargeback defense experts on top of doing everything they need to do to stay competitive in today’s marketplace. That’s why chargeback management software that can automatically and intelligently handle your chargeback-related tasks can be such a great help. The right software solution can respond to your chargeback alerts, track your disputes in progress, and turn your raw chargeback data into readable reports.
To choose the right solution, you need to know what you need for your business and what you should expect from chargeback management software. When you start considering providers, these are the questions you should ask.
Do they understand your unique business challenges?
Chargebacks are like fingerprints: no two merchants will have the same pattern. There are too many variables when it comes to chargebacks—too many reasons and potential sources or vulnerabilities.
That’s why generic chargeback management solutions will only get you so far. To get a real handle on your chargeback problems, your provider needs to study and understand how your business works and who your customers are.
Any coder can write a program that sends an auto-response to chargeback alerts and dumps your chargeback data into a spreadsheet at the end of the month. A real chargeback management solution will be custom-fit to the needs and challenges that are unique to your business—and willing to evolve and grow along with you.
Can they simplify your chargeback management process?
Managing chargebacks means dealing with them in real-time every day: responding to alerts and notifications, compiling evidence for representment, tracking ongoing disputes, updating accounts, and implementing prevention strategies.
Chargeback management software that provides a single integrated platform for all these activities can help merchants take control of their chargebacks. The right solution should be able to go even further by using API connectivity with your payment processor, CRM, and other platforms that your business runs on. Then you can quickly and seamlessly update customer records to flag for chargeback fraud, pull transaction data for representment evidence, and access other relevant information from within your chargeback management interface.
Your chargeback management software should make your life easier, not more complicated. With the right set up, you’ll have a single integrated hub to manage all of your chargeback activity.
How do they help protect your merchant accounts (MIDs)?
You can’t accept credit and debit card payments without a MID from an acquiring bank/payment processor. High chargeback rates can directly threaten your ability to keep those accounts in good standing. Many payment processors will terminate a merchant account if their ratio of chargebacks to transactions exceeds 1%.
Banks and card networks monitor chargeback activity, and merchants who carry high chargeback rates over time may find themselves on the Terminated Merchant File (TMF) or MATCH List. This blacklist can prevent you from opening a new account for up to five years.
When chargebacks get out of control, they can endanger a merchant’s very ability to survive. The right chargeback management software will show you in real-time your chargeback ratio, warn you when it’s rising, and provide the reporting and analytics needed to identify the sources of your chargebacks and the actions you can take to prevent them.
How useful and insightful are their reports?
Fraud and errors can lead to unexpected chargeback spikes at any time. Software that provides summaries at the end of the month can’t give you visibility into new chargeback issues. For that, you need real-time monitoring, current data, and daily reporting.
When a situation is developing, reporting that gives you a clear picture of what’s happening can provide the insights you need to take action to stop further chargebacks and protect your business.
A chargeback management solution that takes your specific business needs into account can generate organized and formatted reports. These reports can then be read, shared, and understood within your organization, making it easier for you to identify your problems and apply human intelligence to solve them.
Can they track performance for multiple MIDs?
Many merchants have multiple MIDs, different storefronts, or separate brands. For these merchants, the difficulty of managing chargebacks is compounded by the fact that they need to keep track of more than one MID.
The right chargeback management software will be able to pull all of your data from multiple accounts into a single organized interface; then, it will split it back out again for tracking and reporting purposes.
Sometimes, it makes sense to view all the chargeback data for your entire roster; however, you might want to zoom in for a tight focus on a particular account that’s having issues. Your software should make it easy for you to switch between the various levels of visibility you need.
Outside of software, what chargeback services do they offer?
Fighting chargebacks means representing the transaction along with evidence that proves that the chargeback wasn’t valid. Choosing which chargebacks to fight and selecting the evidence is still a task best performed by a combination of automation and human intervention. Many chargeback software providers offer chargeback representment services, alerts, and analytics.
It’s essential to be selective about which chargebacks you represent. For example, there’s no point in fighting legitimate chargebacks from victims of fraud, yet you should dispute friendly fraud. Your chargeback provider should be able to manage this and demonstrate the ROI on the revenue they’re able to recover.
Providers may also offer 24/7 monitoring for chargeback notifications or alerts from services like Verifi or Ethoca. For about $40 per alert, these services will send out early warning alerts about disputes that are about to turn into chargebacks. If you see the alert in time, you can refund the customer and avoid the chargeback. Merchants typically have to respond within 24-48 hours, or it automatically becomes a chargeback, so always-on monitoring alerts are critical. Providers can often help you with signing up for and implementing these services, too.
You might also want your provider, and their software, to work with some of the new chargeback “deflection” services, which allow banks and merchants to communicate in real-time to resolve customer disputes without chargebacks. These tools enable merchants to set rules to automatically refund individual dispute inquiries in real-time, preventing them from becoming chargebacks.
A reliable provider will consider how their software fits into your overall chargeback strategy, helping you ensure that all your efforts and activities are serving the goals of reducing disputes and keeping your chargeback rate down.
Do they have your best interest in mind?
Chargeback solution providers are merchants, too—they need to acquire customers and make profits to keep going. But there’s a difference between providers who want to do right by the merchants they serve and ones who are always trying to up-sell you with add-on services that don’t impact your chargeback rate.
When you meet with a potential provider, ask yourself how much experience and expertise they can plausibly claim. Do they seem to understand the specific challenges your business faces? Will the solutions they’re proposing show real, data-proven results for your bottom line?
Your provider should be truthful, transparent, and ready to show you the metrics and data that can tell you whether they’re helping you reduce your chargebacks. Chargebacks are an ongoing issue that touches on every aspect of your business, so you need a partner you can trust over the long haul.
How simple is the sign-up process and how long does it take to on-board?
Once again, the point of chargeback management software should be to make your life simpler. A long and complicated on-boarding and integration process should not be required. Many merchants only start looking for providers once they realize they have a problem. Good providers will begin monitoring and protecting those merchants right away, not making them endure weeks of continued revenue loss while slowly getting an intricate software system up and running.
Make sure you know ahead of time what your provider’s on-boarding process looks like, how long it takes, who will be the primary contact person guiding you through it, and fielding any questions or issues that follow.
How secure is their software?
Chargebacks can involve some of the most sensitive data about your customers, products, financials, marketing plans, and errors. This data is what all your security procedures and protocols are designed to protect, so don’t let your provider become the weak link.
The provider should be able to give you an overview of their data security policies and practices. It’s fair to inquire whether they have any history of data breaches or non-compliance with card network regulations.
When your customers’ data is going to pass through a third party’s APIs and residing on their servers, you must vet them thoroughly or be liable for their security lapses.
How transparent is their billing process?
Fighting chargebacks can’t create revenue. It can only protect revenue you’d otherwise lose. That makes it essential to ensure that every dollar you’re spending on chargeback defense is being put to good use. To be confident you’re getting a good ROI from your provider, you need clear and comprehensible invoices that detail exactly what you’re being charged for and why.
Before signing on, ask to see a sample invoice. Make sure any upfront costs are spelled out and ask for an explanation of any fees or line items you don’t understand. You should be able to connect the dots between what you’re paying for and what the software is doing for you.
Transparency and performance data are your best friends when it comes to making sure you’re getting plenty of anti-chargeback bang for your buck.
The Right Experts with the Right Software
Now that you know what questions to ask, you might be wondering how MidMetrics meets these standards. The first thing to remember is that MidMetrics is an entire toolbox of programs designed to get at the heart of a chargeback problem and start generating solutions: Management Dashboards, In-Depth Analytics Tools, On-Demand Reports, and Integrations, all working together to give you a comprehensive platform for monitoring all of your MIDs and chargeback activity.
MidMetrics simplifies chargeback management by combining chargeback and data services into a single platform. As an all-in-one solution, MidMetrics allows merchants to monitor their chargebacks, alerts, refunds, and decline/acceptance rates in real-time from a single location. With customizable analytics tools, MidMetrics provides merchants with insightful and actionable data reporting.
MidMetrics is designed to be easy to implement and begin using without a lot of IT work on the merchant’s end. It integrates via API with payment processors, gateways, and CRM systems. When required, it can log in with secure credentials to bank and credit card providers that allow direct connections.
For reporting, MidMetrics automatically identifies and aggregates relevant information and can normalize data pulled in from different sources in varying formats. MidMetrics reports present chargeback data in a highly visual form to deliver insights and allow merchants to take quick action.
With all of these valuable resources united under a single platform, you can fight and prevent chargebacks much more efficiently. Rather than assemble a hodgepodge of tools, integrations, and analytics solutions from various sources—or trying to cook them up from scratch in-house—you can make one purchase and get a full suite of proprietary chargeback management tools and integrations from MidMetrics.
