Chargeback prevention is essential for businesses of all types and sizes since it is a sure way to safeguard your merchants and revenue. Yet, how exactly do dispute prevention systems work, and what do professionals say about them? Discover more in this article.
What Is a Chargeback?
First things first, you must figure out what a chargeback is. To put it simply, a chargeback is the procedure of refunding a customer after a dispute. In fact, if you are a customer, it’s a pretty useful service that will protect you from financial losses. However, it’s not so bright for businesses since fraudulent chargeback requests and friendly fraud have a rather bad impact on your merchants and reputation, not to mention significant fees and penalties. Thus, chargeback protection is extremely important for businesses of all kinds and sizes.
Why Is Chargeback Prevention Important for Businesses?
We have briefly mentioned above that merchant chargeback prevention is important for businesses, but why exactly are they? Let’s see.
- Financial loss prevention. Disputes cost money, and pretty often, businesses lose twice as much of the purchase cost. That happens because chargebacks aren’t free and come with multiple fees and penalties. Additionally, if after a chargeback, a product isn’t returned and cannot be resold, you lose the complete value of that product (including marketing expenses and other similar costs), as well as pay dispute fees and sometimes costly penalties if you have too many chargebacks.
- Merchants protection. Too many disputes are obviously, bad for your merchants, and in the worst-case scenario, your merchants can even be closed by the bank. Dealing with such a problem is pretty challenging, time-consuming, and extensive, so it’s best to prevent it.
- Reputation security. The fewer chargebacks you have — the better your business’s reputation is. Spotless reputation is equally important for your relationships with payment processors and banks as well as your customers, so make sure to protect it.
- The best user experience. Smooth and quick payment processing is rather important for most customers, and chargeback prevention systems will help secure and increase your transaction approval rate which will result in the best user experience for your customers.
- Fraud protection. Lastly, most modern chargeback prevention alerts come with pretty decent fraud protection features that automatically detect suspicious transactions by analyzing the transaction data (geo, BIN, currency, etc.) and blocking them.
As you can see, chargeback prevention is rather important for all online businesses, so let’s talk more about it in the following paragraphs.
How to Prevent Chargebacks?
You might have already guessed that the best way to avoid chargebacks is by using prevention alerts. But which one to choose? Let’s take a brief look at the three best dispute prevention services:
- Ethoca. Perfect for Mastercard payments, Ethoca is a reliable ally in the fight against chargeback fraud. It will securely protect your merchants and safeguard your revenue thanks to its useful features, such as CNP fraud detection, dispute prevention, Fraud Insights, and more. Plus, Ethoca is available within Germius CRM, which is pretty useful.
- Verifi. This chargeback prevention system by Visa is another great option for those business owners who want to eliminate chargebacks and protect their merchants. Verifi comes with a wide variety of features that help prevent chargebacks and friendly fraud. In particular, Rapid Dispute Resolution (RDR) automatically prevents disputes before a chargeback procedure is started. At the same time, Order Insight grants full info about a purchase from sellers, which helps reduce chargebacks at first customer inquiries. Finally, Verifi is also available within Germius.
- Kount. Lastly, Kount is an AI-powered dispute prevention tool that will help you prevent chargebacks and eliminate fraud quickly and stress-free. The tool’s algorithms analyze chargebacks for patterns, which efficiently helps prevent most types of chargebacks and friendly fraud.
All in all, a chargeback prevention system is a must for any business, so if you still don’t have it, pick one and install it as soon as possible.
How Do Chargeback Protection Systems Prevent Disputes?
There are many chargeback prevention services available on the market today, but the majority of them have pretty similar algorithms. In particular, most dispute prevention alerts’ workflow is the following:
- The issue sends a notification about a dispute
- The prevention service sends an alert to the merchant
- Merchant refunds a customer to prevent the chargeback procedure
- The issuer receives an outcome notification from the chargeback prevention service
As you can see, the mechanism is not too sophisticated at first sight, but that’s just because we didn’t get into much detail. In general, chargeback prevention alerts do a lot of analyzing and data processing, too, which helps them distinguish fraud and efficiently prevent chargebacks.
What Do Professionals Say about Chargeback Prevention Systems?
So far, chargeback prevention alerts seem simply awesome, but what do professionals who actually use those systems every day think of the need to get a dispute prevention system? Let’s take a look at some actual reviews from Quora.
Rey Pasinli
“When used properly, these types of systems can eliminate 50%-90% of your fraud-related chargebacks. So it all comes down to how much the chargeback losses are (lost inventory, customer service headaches, C/B other processing fees, etc.) times the recovery rate, less the service fees.”
Scott Morley
“3D-Secure is a great start. When transactions are authenticated by 3DS, chargebacks are typically reduced by 30–50%. 3DS authentication prevents many types of disputes, including the popular “transaction not recognized.” 3DS recognizes 100’s of data points on a buyer so the transaction can be authenticated.”
Kathy Brooks
“The best way a business can protect itself against credit card fraud is through employing a KYC and AML solution which covers the business needs effectively. This means that the solution should be able to verify the identity and ID of the customers.”
Therefore, secure payments and chargeback prevention systems are worth it, so why don’t you explore Germius and get everything in one place?
Final Thoughts
Chargeback prevention systems do help prevent revenue losses and secure their reputation, which makes them so important for all kinds of online businesses. Therefore, if you still do not have a reliable chargeback prevention system, make sure to get one.
