Pre-dispute resolution services (also known as chargeback alerts) are a valuable resource in the fight against chargebacks, but they are not a panacea – while they save time and money in the right circumstances, overuse can lead to lost revenue, emboldened friendly fraudsters, and rising chargebacks. This article will explain the different types, the benefits, and the potential pitfalls of these services.
What Are Pre-Dispute Resolution Services?
Pre-dispute resolution services are systems that allow merchants to intervene in disputes as quickly as possible, typically forfeiting the chargeback amount, but avoiding the formal chargeback process and the fines and fees incurred by lost disputes. Pre-dispute solutions are an important tool for Merchants to control their fraud ratios and avoid fines from programs like VAMP. Some of the most common types of pre-dispute resolution services are Mastercard’s Ethoca Alerts and Consumer Clarity systems, Visa’s CRDN, RDR, and Order Insight, and Amex’s ADR. We’ll explore each of these in more depth below.
Ethoca (Mastercard)
Acquired by Mastercard in 2017, Ethoca’s global collaboration platform allows merchants to curb chargebacks and reduce fraud by enabling real-time data sharing between merchants and issuers. Ethoca’s main offerings are its Alerts and Consumer Clarity programs, each of which can be accessed through Ethoca or associated resellers.
Ethoca Alerts
Ethoca Alerts are notifications that warn merchants when a cardholder complains to their issuer about a transaction. Merchants have 48-72 hours to respond by refunding the transaction before a formal dispute is initiated, or escalating the dispute to a formal chargeback. Ethoca Alerts are one of the most widely-used pre-dispute resolution solutions on the market, covering 95% of Mastercard transactions globally, and 50% of transactions from other card schemes.
Ethoca alerts are available as part of the Justt chargebacks platform. Learn more →
Consumer Clarity
Ethoca Consumer Clarity provides issuers with enhanced transaction details to help prevent disputes before they begin. When cardholders question transactions they don’t recognize, issuers can immediately supply them with purchase information including merchant logos, item details, shipping information, and customer service contacts.
Originally known as “Eliminator,” this data-sharing solution allows merchants to provide real-time transaction clarity through integration with their CRM or order management systems. Research shows merchants in North America have experienced up to a 23% reduction in Mastercard chargebacks after implementing Consumer Clarity.
Verifi (Visa)
Since being acquired by Visa in 2019, Verifi has continued to expand its suite of pre-dispute resolution services. Like Ethoca’s solutions, these tools aim to prevent potential disputes escalating into formal chargebacks, preserving both revenue and reputation.
Cardholder Dispute Resolution Network (CDRN)
Like Ethoca’s Alerts, Verifi’s CDRN provides merchants with notifications when disputes are initiated. The key difference is that CDRN offers a slightly longer response window of 72 hours, lending merchants additional time to investigate and respond appropriately. CDRN works across multiple card networks, covering many of the same transactions as Ethoca Alerts – take care not to use both for the same disputes, as you will receive duplicate charges.
Verifi RDR is available in Justt. Learn more →
Rapid Dispute Resolution (RDR)
Verifi’s RDR allows merchants to establish rule-based responses to different dispute scenarios. Unlike CDRN and Ethoca Alerts, which require manual merchant review, RDR enables merchants to set specific criteria for automatic refunds or escalation. These rules can be based on transaction amount, customer history, product type, reason codes, or even currency. For example, a merchant might configure RDR to automatically refund all disputes under $25, while escalating higher-value transactions for manual review. If used wisely, selective refund automation can significantly reduce the administrative burden of dispute management.
Verifi RDR is available in Justt as well. Learn more →
Order Insight
Verifi Order Insight functions similarly to Ethoca’s Consumer Clarity, providing issuers and cardholders with detailed transaction information during the dispute inquiry phase. When a cardholder questions a transaction, Order Insight delivers comprehensive purchase details within seconds, helping to jog customers’ memories and prevent unnecessary disputes.
Order Insight’s enhanced Compelling Evidence 3.0 (CE3.0) feature establishes specific criteria for dispute abandonment, such as proof that the same payment method was used successfully in previous transactions from the same device or IP address – this significantly strengthens merchants’ ability to prevent illegitimate disputes.
ADR (American Express)
American Express’s Accelerated Dispute Resolution (ADR) provides merchants with an 8-day window to respond to disputes before they become formal chargebacks. During this period, financial liability remains with American Express, relieving merchants of immediate pressure.
ADR offers several response options: refunding the transaction, challenging the dispute with evidence, settling directly with the cardholder, or opting out to follow the standard dispute process. The program is currently available only for non-fraud disputes initiated within 75 days of the transaction date.
How to Make Pre-Dispute Resolution Services Work for You
Pre-dispute resolution services are very useful, but they must be used strategically. They are a great way to keep fraud ratios under control, but when overused, they can result in lost revenue that could be recovered. Let’s look at a few ways to ensure you’re making the most of these solutions:
1. Use Them…
Pre-dispute resolution services offer significant benefits when used in clear-cut dispute scenarios, where the merchant is at fault or true fraud is at play. Their primary advantage lies in enabling refunds for legitimate dispute requests before they become chargebacks, avoiding the associated fees, penalties, and impact on chargeback ratios.
The data-sharing capabilities of Ethoca Consumer Clarity and Verifi Order Insight further reduce disputes by preventing confusion over unrecognized transactions, while RDR’s automation capabilities can substantially reduce the administrative burden of dispute management.
Moreover, with the upcoming implementation of the Visa Acquirer Monitoring Program (VAMP) in Europe – likely to expand to other regions – Verifi’s systems will soon prevent pre-resolved disputes and fraud from counting toward a merchant’s VAMP rate, providing even greater protection against card scheme penalties.
2. …But Use Them Judiciously
Despite these benefits, indiscriminate use of pre-dispute resolution services can be counterproductive. Some merchants find it tempting to resolve every dispute immediately to save time and prevent penalties, but this approach is a false economy. Research indicates that up to 70% of disputes are illegitimate – these can and should be fought and won. Otherwise, chargeback related losses of revenue, products, shipping fees, and labor, can quickly erode up to 25% of net income.
Similarly, merchants should exercise caution when configuring RDR rules. Overly lenient criteria effectively automate away legitimate revenue. Keep these rules stringent and reserve automated refunds for scenarios where disputes are clearly valid or the cases where transaction value doesn’t justify the cost of fighting.
3. Use Chargeback Dispute Management to Dispute Winnable Cases
Many merchants overuse pre-dispute resolution services because they perceive fighting chargebacks as complex and time-consuming. However, enlisting a comprehensively automated chargeback management solution requires even less merchant effort than pre-dispute resolution, while yielding significantly higher ROI. Solutions like Justt can handle the entire dispute lifecycle, from evidence collection to submission, freeing merchants to focus on their core business.
For optimal results, work with a dispute management provider that offers integration with both Ethoca and Verifi services. This all-encompassing approach enables merchants to utilize pre-dispute resolution when appropriate, while fighting illegitimate disputes effectively through automated representments.
For the Win? A Two-Pronged Approach
Pre-dispute resolution services are powerful tools in any merchant’s chargeback prevention arsenal, offering significant benefits when deployed strategically. These services handle legitimate disputes quickly and efficiently, preventing unnecessary chargebacks, fees, and ratio impacts. However, they are not a complete solution.
The most effective approach combines judicious use of pre-dispute resolution with robust automated representment capabilities. Only by knowing when to refund and when to fight can merchants maintain positive customer relationships, minimize operational burdens, and protect their bottom line from the devastating impact of friendly fraud.
