When I ran my skincare company, chargebacks were one of the most critical KPIs for our team to follow. They affected our bottom line. They also told us things, like what affiliates sucked and needed to be tossed to the curb. More importantly, they were an existential threat to our merchant accounts.
I can tell you right from the start, we outsourced our chargeback management. I have never regretted that. I wanted our team to be focused on increasing traffic, providing awesome products and service and decreasing our risk. I could have had a small department managing chargebacks within our company in the name of “saving money”. That would have slowed us down AND cost more money.
Chargeback representment explained
We talked about chargebacks being an inevitable part of business. That’s true, but it’s also true that you can in certain situations dispute them. This is where chargeback representment comes in…
So what is chargeback representment?
It’s a process where merchants can submit evidence to their bank to prove that the transaction that occurred was indeed valid, and that the chargeback brought forth by a cardholder/customer should be overturned. Put simply, representment is your opportunity to reverse the chargeback and save the revenue.
According to Verifi, a JPMorgan report found that on average merchants win 22 percent of their chargeback cases. It’s also worth noting that only 30% of merchants actually represent all their chargebacks, and 56% represent fraud related chargebacks. So keep in mind that you’ll miss 100% of the shots you don’t take, but you also need the right technique and strategy to get winning shots too!
To represent a chargeback, you’ll need the following:
- Evidence
Anything that can prove that the transaction was indeed valid will help convince your bank that you are in the clear. And remember, the reason code also matters in this, so if fraud is suspected, make sure you have the right evidence to prove that it wasn’t. Examples can include: Your return policy, tracking information, receipts, a matching AVS and CVV on the customer’s transaction, their IP address and customer emails are all great pieces of evidence, but you could definitely find more! - A Chargeback Rebuttal Letter
When submitting your evidence to the bank, you need to present it in a professional and detailed way. This is why you should use a chargeback rebuttal letter when submitting your evidence to the bank, and this formal letter should also be skimmable, using shorter sentences, bullet points, and writing that makes a persuasive argument that the chargeback is unwarranted. The amount you are contesting, the reason code, and any other evidence are also important things to include of course.
Is it worth the trouble to represent your own chargebacks?
Merchants do this to prevent profit losses, but it can also prevent customers from abusing their services in the future, and can send a clear message that you won’t take illegitimate chargebacks. If you do decide to go the route of chargeback representment, it may feel hard to know where to start, and the costs of hiring a staff to handle chargebacks may seem daunting. Knowing some of the work involved details, is chargeback representment truly worth the time?
The short answer is no.
Look, it may seem enticing to handle this process in house and represent your own chargebacks, but rest assured it’s a trap and a disaster waiting to happen. You could do everything in house, but do you have the right people in your team that truly understand complicated bank policies, card brand processes and the sudden shifts they may have, month to month, and year to year?
In the end, your team will likely end up spending more time, and more money, representing chargebacks with worse results than if you were to outsource chargeback representments and alerts. This is especially true if you and your team lack experience, and don’t know what evidence truly convinces a bank that the chargeback is illegitimate.
Why representing your own chargebacks is a bad idea…
So by now, you get that representing your own chargebacks probably just isn’t worth the trouble. It’s also a bad idea too! You and your team need to be focused on marketing and running your company. It’s as simple as that. On top of creating a disruption in productivity, focusing on chargebacks can take time away from the bigger picture, and can lead to profit losses on top of losses incurred from chargebacks.
Another reason representing your own chargebacks is a bad idea comes down to some merchants not fully understanding and utilizing the information at their fingertips in regards to analytics. You should be using the intelligence gained from your chargeback provider to make adjustments to your operations to reduce chargebacks and risk. Reviewing chargeback and risk analytics and using them to improve your processes is the only aspect of chargeback management that you or your team should be involved with.
Work smart, not hard.
It’s not a question of if chargebacks will happen, but when. You’ll need to deal with your chargebacks, one way or the other. You can choose to represent your own chargebacks, which will involve countless hours studying the (ever-changing) chargeback rules and processes. You’ll also need to setup and manage your own alerts. Oh, and you’ll need to be sure all of this gets done well, and quickly, because there is a limited time-frame in which to represent chargebacks. Even if you manage to do all this well, you will still be missing a critical piece – chargeback analytics.
Outsourcing to an experienced, qualified chargeback representment team will get you the vital analytics you need to improve your processes. Besides, who do you think will win more chargebacks (and save more revenue) for you – your homegrown team or a qualified chargeback representment company?
The merchants that are able to keep their MIDs live and use chargeback intelligence in their favor are the merchants that will scale and gobble up market share.
With that in mind, HeliosPayments is here to help!
We have extensive experience with merchants in the high risk space, and we’ll get the ball rolling for you in no time. With our access to 25 banking institutions, and relationships with trusted banks in the US and the EU, you’ll get more options to find the best rates and the right payment processing tools for your business.
And in addition to helping you fight and prevent chargebacks with our chargeback representment services, we’ll also give you 3D Secure authentication to get you the right proof needed to establish that the customer made the transaction – and prevent those chargebacks from happening in the first place.
Remember – not all banks are created equal, and many aren’t as forgiving about chargebacks as you’d expect. This is why we’ll help you choose a bank that truly understands high risk merchants and is more tolerant when it comes to chargeback risk.