As someone whoโs behind Justtโs chargeback management product roadmap, I love speaking with Justtโs customers to learn more about how they use Justt, and more importantly, why they use it.
Each Justt customer has a different business with different pricing, product, and service dynamics, and, as thus, chargebacks impact them differently, resulting in differing chargeback strategies.
I had the lovely opportunity to discuss this on stage, at the MoneyTLV event, with:
Roni Siegmann – Director of Fraud Prevention at HoneyBook; and
Roie Shiloah – VP Revenue at Simply.
Moving away from the App Store has its challenges
Simply, formerly JoyTunes, is a privately held company that develops mobile applications for learning creative hobbies including music, drawing, and other creative skills.
Shiloah: โour core mission is to let people acquire creative skills in an easy and simple way. We started our journey as an application company where the core of the transaction happened in the app and through the App Store. In recent years weโve shifted to the worlds of alternative billing.โ
โAs an app company thatโs using App StoresโGoogle and Appleโyou have peace of mind. On the one hand, youโre paying up to a 30% commission, but on the other hand, App Stores manage all the operations: chargebacks, refunds, and customer service.โ
When the regulatory environment started changing, with Direct Merchant Accounts and lawsuits that forced app stores to allow alternative billing (e.g. the Epic Game lawsuit), Simply could begin to utilize alternative payments. It looked simple: โwe decided to simply take Stripeโs SDK and implement it inside the app. Things looked great. Margins went up, but after several weeks, we began to discover things that we did not foresee.โ
Simply started getting chargebacksโa lot of them. โThe numbers initially just didnโt make sense. They were much higher than the benchmark, at 5-6% of transactions. Even worse, 80% of cases declared that the chargeback was related to fraud. We started getting fines.โ
Shiloah understood that this required some serious attention: โwe needed to understand the patterns. Weโre an app company, we offer subscriptions, and we have free trials. Yet, users are filing chargebacks.โ
From the data perspective, three things became apparent:
- The first insight was geographical: โsome countries had very high chargeback rates. There were people there that used the trial, and when it ended, they submitted a chargeback. We needed to make a decision about what to do with those regions.โ
- The second insight was that, in some cases, users did not seem to understand what a trial period means. โThey assumed that the app was free and that someone should proactively contact them in order for them to be charged. In this case, we understood we needed to better communicate with the usersโthat we can no longer count on the app stores to do this job for us. This made us focus on the communication with the user: to reduce the friction they experienced and their likelihood to submit a chargeback.โ
- The third insight was that, what consumers call fraud isnโt fraud in the ordinary sense, but rather, friendly fraud. There are users that are forgetful or that did not understand the situation, and then opted to act in the simplest way for them, which was to file a chargeback instead of accessing customer service and asking for a refund.
From the technology perspective, Shiloah understood Simply would have to begin using tools to deal with its chargebacks.
โInitially, we dealt with chargebacks on our own: we prepared the evidence, submitted, etc. We began to see the limit of that and to understand that there are services that can help us deal with this issue. We started working with Justt for chargeback management, and Verifi for alerts.โ
Merchants of record need to deal with their merchantsโ chargebacks
HoneyBook is an all-in-one client flow management platform designed for independent businesses, helping them handle the entire client process from lead inquiry to final payment. It centralizes tools like proposals, contracts, invoicing, online payments, and scheduling in one placeโaiming to streamline operations, improve client experience, and allow businesses to focus on their work.
Roni Siegmann, Director of Fraud Prevention at HoneyBook, had unique challenges. โWe are the Merchant of Record for all our merchants. Our customers get paid by their clients, such that our customersโ clients are the ones filing the chargebacks, and we need to deal with them. Some chargebacks are the result of fraud. In that case, our focus is prevention. But for the rest, we need to deal with disputing the chargeback. This is an important part of our offering at Honeybookโpart of the service we give our merchants. When they get a chargeback, which is very distressing for them, we walk with them hand-in-hand. Those chargebacks are often their first and something they perceive as traumatic, where they feel that someone is trying to take away their hard-earned money. Merchants are very grateful, since itโs a difficult point for them, and this makes our service well-perceived by them.โ
Siegmann needs to ensure that helping clients with chargebacks is an ROI-positive activity. โTo do this, we work together with Justt and use their knowledge and ours to understand which chargebacks are worth fighting and which arenโt, and what the likelihood of winning is for each chargeback.โ
Siegmann divides their strategy into two parts:
- Fraud needs to be dealt with almost immediately by preventing the transaction itself and not letting bad actors into our systems. โThis is a challenge that never goes away, there always is fraud and you always need to be on top of it,โ he says.
- For non-fraud chargebacks, he insists on understanding the entire caseโwhat happened, is this friendly fraud, which evidence will help, and how to use data and AI to deal with the chargeback and dispute it.
When chargeback alerts matter and when they donโt
Setting up the ability to deal with customer service and payments has its costs, and Simply needed to incur them when it decided to use alternative payments. It could no longer have the App Stores do this work for them.
For Simply, dealing with chargebacks involves two tools:
- Justt for chargeback management and
- Verify for chargeback alerts.
For alerts, the approach is to understand the pattern behind the alert. If the alert shows there is a low likelihood of winning the chargeback, Simply will refund. But, if it looks like winning is likely, Simply will let the alert proceed to become a chargeback and dispute it.
Recent rule changes and seasonality impact chargeback strategies
Shiloah spoke about recent rule changes, such as the addition of the Stripe fee, and how they have impacted the companyโs chargeback strategy. โIn the case of Stripe, there is an additional charge of $15 if we fight a fraud chargeback and lose. This has impacted how we make decisions on what to fight and what not to fight.โ
He explained that Simplyโs approach to using alerts is also impacted by seasonality. โSometimes, you can see that people made a New Year’s resolution to acquire a new creative skill. This, of course, means that in certain periods there is a higher chargeback risk.โ This is taken into account with regards to alertsโfollowing spikes, Simply may find it better to automatically refund based on the alert tool. While in typical times, Simply wonโt automatically refund, but actually take a look at how people used the app prior to making the decision about whether to refund or not.
Siegman said that the cornerstone of their strategy is data: โthe wiser you are, the better your wins are. We pick our fights and tell merchants what we believe about their ability to win, and weโre usually right.โ
A new feature by Justt, Dispute Optimization, helps with determining the likelihood of winning a dispute, on a case-by-case basis, and to adjust decisions accordingly.
