Today’s commerce market is so fast-paced that chargebacks are all but unavoidable. This also means that they have a significant influence on your brand credibility, operational efficiency, and financial stability. If you want your business to thrive in such a competitive landscape, the best thing you can do is develop a solid chargeback management strategy.
Not quite sure what this involves? Here’s how to navigate the tricky terrain of chargeback management and safeguard the reputation and financial health of your business!
What Is Chargeback Management?
Chargebacks, or customer disputes, are forced payment reversals initiated by the issuing bank. Chargeback management involves controlling the impact that chargebacks have on your business. Managing chargebacks successfully requires addressing dispute prevention and revenue recovery, with the end goal being to keep your chargeback ratio acceptable.
All chargebacks stem from one of three sources: first-party (friendly) fraud, third-party (criminal) fraud, and merchant error. Each source requires a different management strategy, and this is usually a lot more complex than simply looking at chargeback reason codes.
Why You Need a Chargeback Management System
Having a solid chargeback management strategy allows you to close fraud loopholes on time. This involves tracking and verifying the customer’s identity before they complete the transaction. For instance, applying authorization holds will prevent most hackers from forcing chargebacks.
A well-defined chargeback policy also helps you plan strategies for preventing and contesting disputes. You can do so by quality-assuring your transaction records to prevent clerical errors and double-billing mistakes. Beyond limiting internal errors, a well-defined system allows your customers to recognize bills, which is helpful for subscription payments.
Finally, efficient chargeback management makes your accounting much easier. Instead of including chargeback losses in your sales costs, you can account for these distinct costs and have your books make more sense.
Which Software Should You Use to Manage Chargebacks?
The best way to manage chargebacks is through a dedicated software solution. Specialized platforms allow you to do all sorts of things, from tracking inquiries and disputes to detecting chargeback patterns. These days, most chargeback software also uses machine learning and AI to streamline error processing, data analysis, and other key tasks.
Your two main chargeback software options are SaaS solutions and fully-managed solutions. SaaS (software as a service) is the self-service option that involves your provider licensing the software to you on a subscription basis. SaaS is flexible and affordable, but it does involve some ongoing oversight, such as keeping track of your reporting and analysis.
Hiring a fully-managed service means outsourcing your chargeback management to the experts. Though this approach limits your insight into the process, it’s a good option if you want to focus on actually running your business by taking disputes off your plate.