Merchants are at a disadvantage in chargeback disputes. It’s more likely that the disputing customer will win and leave the business with a chargeback.
Chargeback disputes work like legal trials. There are two parties as well as a neutral third-party to help decide who is in the wrong. This is usually a corresponding credit card provider such as Visa or Mastercard. They sit as judges in dispute trials.
Both parties provide evidence to support their claims. The merchant is on the defensive in disputes and it’s more crucial for them to provide the evidence that will best defend them.
What is the Dispute Resolution Process?
Dispute resolution starts with the dispute itself. There are a variety of reasons a customer files a dispute. Some common ones are unauthorized transactions – fraud. Or mistakes such as items not as described, etc. Visa has four categories in which dispute reasons fall under: Processing errors, customer disputes, fraud, and authorization.
It’s the merchant’s responsibility to communicate with the disputing customer to resolve the issue. Ideally, customers will contact merchants prior to filing a dispute with their bank – but that is not always the case. Merchants can overcome this gap in communication through tools such as chargeback alerts so that they can be aware of all incoming disputes.
An unresolved dispute becomes a chargeback. However, each credit card provider gives different time frames for dispute resolution before a chargeback is filed. During this time, businesses can provide the bank and credit card provider compelling evidence to protect themselves and hopefully settle the dispute.
The order of steps in a dispute usually goes:
- Chargeback Hits Merchant Account
- Pre-Dispute Decision or Pre-Arbitration
- Pre-Arbitration Responses
Merchants exchange evidence with the clients’ bank in the pre-arbitration stages. This gives merchants and banks chances to resolve disputes before they enter arbitration, where credit card companies will take over.
Dispute resolution changes over the last few years do leave merchants at a certain level of disadvantage. Visa Claim Resolution (VCR) is an updated dispute resolution workflow that gives businesses less time to communicate with disputing clients and banks. This is why having compelling evidence ready is crucial in fighting chargebacks.
What is “Compelling Evidence”?
“Compelling evidence” is the term credit card names like Visa use to describe evidence businesses can present in dispute processes.
Compelling evidence should correspond with the reason that a dispute has been filed. An example would be presenting proof of delivery in a dispute where a customer claims they never received their purchase.
Businesses can refer to the reason code assigned to a chargeback in order to find the right compelling evidence.
How Businesses Can Set Up for the Best Evidence
Preventative measures and proactivity can help merchants send in the best evidence to reverse chargebacks.
Enforce Signed Delivery
Enforcing signed delivery can mitigate one of the hardest disputes to fight: the ones caused by friendly fraud. Friendly fraud are instances where customers cheat businesses out of their product and money, essentially stealing from them.
A common friendly fraud dispute is a claim about undelivered items. Although it’s extra effort, enforcing client signature upon delivery is the best way to fight against friendly fraud. Your compelling evidence in these cases would be the proof of delivery signed by the customers themselves.
Additionally, investing in delivery tracking features can give proof of shipping in the case of interception.
Authentication is crucial in e-commerce. Doubling down on authentication decreases the chances of chargebacks. The extra hassle pays off when unauthorized purchases are prevented through simple authentication measures.
A couple of great e-commerce authentication methods are address verification (AVS) and CVV.
3D Secure is another fraud filtering tool that has become crucial in transactions. This authentication technology detects risky transactions and asks for additional verification.
Many customers go to their bank with a problem they have with a business before communicating with them about the business itself. Disputes and chargebacks can be prevented if customers allowed merchants to fix issues instead of opening a dispute.
Customer service that predicts problems before they arise can make a dent in a business’s chargeback rate. Communication can also be used as evidence in the case of a dispute. Keeping paper trails can pay off in the long run.
Need More Chargeback Help?
High risk businesses such as those in eCommerce are likely to have high chargeback rates. Revitpay offers tools and guidance as well as payment processing for high risk merchants. Contact us today to find out how we can help lower your chargeback rate.