The Ultimate Chargeback Solutions Guide

Discovering the features that make a great solution to managing chargebacks.
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A chargeback solutions guide wouldn't be complete without understanding the idea behind effective chargeback management in the first place, so let's dive in.

What is Chargeback Management anyway?

Chargeback management is the strategic process used to “manage” the complete lifecycle of chargebacks: preventing, disputing and resolving.

In cases where chargebacks do occur, chargeback management involves responding to them promptly, providing evidence to dispute the claim, and working with the customer's card issuer to resolve the issue and recover lost revenue.

To be effective, chargeback management involves analyzing transaction data, identifying potential issues that may lead to chargebacks, and taking steps to prevent them from occurring. 

What makes an effective solution?

A truly effective solution should always be designed to streamline the chargeback management process and significantly reduce the burden felt by merchants, both in the time spent responding to disputes and reducing the potential for revenue loss:

Automation can help merchants gather and organize the documentation they need to fight chargebacks, which can be a time-consuming and manual process.

Reporting and analytics provide transparency in chargeback operations and help merchants track key metrics, such as dispute volume and resolution rates, in order to identify trends and areas for improvement.

Ease of use and integration support for existing systems rounds off the "must haves" of any chargeback solution, manual or automated. Merchants need a solution that is intuitive and user-friendly, so they can quickly learn how to use it and incorporate it into their existing workflows. Additionally, the solution should be able to integrate with other systems, such as payment service providers, so that merchants can manage chargebacks seamlessly within their existing infrastructure.

But what about fraud?

Effectively recognizing chargeback fraud requires businesses to have advanced fraud detection tools and expert knowledge of the chargeback process in order to accurately determine the validity of each dispute and minimize the risk of losses.

These types of disputes can be difficult to resolve since they often involve subjective opinions and interpretations. 

Friendly fraud is also intentionally misleading by nature, with customers falsely claiming that they did not authorize a transaction or that a product was never received.

All of this makes up a big ask for merchants.

We've broken down the different types of fraud below to help you understand and vet potential solutions that claim to combat all types of chargebacks.

Criminal Fraud
Merchant Fraud
Friendly Fraud

What is it?

Criminal (or third-party) fraud refers to a type of fraud in which criminals steal credit card information and use it to make fraudulent purchases, which the original cardholder then charges back because they did not authorize the transaction.

This is the most severe type of fraud since criminals are often able to bypass many of the traditional fraud detection mechanisms.

What to look for?

To effectively combat criminal fraud, businesses should look for a fraud solution that includes advanced fraud detection tools and analytics, such as machine learning algorithms, or an ability to identify patterns of suspicious behavior and flag potential fraudulent activity.

What is it?

Merchant fraud refers to instances where a business submits a charge unauthorized by the cardholder or charges a cardholder for goods or services not delivered.

Sometimes mistakes occur when a merchant's employees are unfamiliar with the ins and outs of payment processing.

Other times, the merchant is in unwilling to return funds to a cardholder who did not receive an item or received item that was not as advertised, and therefore, the cardholder is entitled to a chargeback.

What to look for?

A chargeback solution that provides merchants with superior analytics that enable root cause analysis of chargebacks.

With clarity into the causes of its chargebacks, a merchant should be able to address and reduce payment processing errors, problems in shipping and fulfilment and sources of misrepresentation of products on its website. Analytics are key for reducing merchant fraud in instances where the problem is largely unintentional.

What is it?

When a customer disputes a legitimate transaction that they authorized and received their purchase, that's known as friendly fraud.

What to look for?

Effective friendly fraud solutions defend and reverse false claims initiated by a customer (whether by accident or with malicious intent).

Evidence collection and automated representment are the keys of chargeback solutions that work to combat friendly fraud effectively and at scale.

Download the complete guide to learn more about the benefits of a fully managed chargeback solution including: when to go in house vs. outsource, types of third-party solutions and key takeaways for finding a solution that works for your business.

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