How a Chargeback Dispute Can Increase Profits
Should You File a Chargeback Dispute?
A chargeback dispute, however, can do more than simply return lost revenue (although that, in and of itself, would be worth the time).
Is it worth the time and aggravation to dispute every chargeback? How can a chargeback dispute help a merchant increase their bottom line?
Merchants are losing money at an alarming rate due to chargebacks. According to The True Cost of Fraud study, a $100 chargeback can cost the merchant $308. Additionally, merchants in 2015 lost 1.32% of revenue to chargebacks – a 94% increase from 2014.
Successfully filing a chargeback dispute allows the merchant to recoup the sale, putting the profit back into the bank. While many merchants feel as though disputing a chargeback is not worth the time and effort, the reality is that chargebacks can start to add up in lost revenue very quickly.
Each successful chargeback dispute helps increase the company’s bottom line.
Merchants are assessed fees for the privilege of accepting credit card transactions. These fees, known as interchange fees, are determined by the individual card networks and are based on a number of factors. Things that affect the interchange fee are:
- The Merchant Category Code
- The type of card used (credit card/debit card)
- The brand of the card
- The processing method used (card present vs. card not present)
- The data included with the transaction (card security codes, AVS)
While some of the factors influencing interchange fees are beyond the merchant’s control, there are ways to reduce the fee being charged by addressing the specific areas within a merchant’s domain. Including verification information with each transaction demonstrates to the bank that transactions are being handled appropriately.
Not only does this reduce the fees charged, it helps to prevent chargebacks. Merchants who have an elevated number of chargebacks are considered high risk and pay higher interchange fees.
Disputing chargebacks helps to negate the perception that the merchant is a risk.
Under the current system, merchants that receive chargebacks are assumed to be guilty by the issuing bank. Failing to file a chargeback dispute solidifies that belief, and increases the likelihood that the bank will process additional chargebacks in the future.
Merchants that respond appropriately and successfully refute a chargeback are, in effect, sending a message to the bank about their innocence. A repeated pattern of successful chargeback disputes can indicate to the bank that the merchant has sufficient processes in place to validate transactions, making them less likely to assume the merchant’s guilt in the future.
Repairing For the Future
With every chargeback, merchants are provided a reason code from the bank. To successfully win a chargeback dispute, the merchant must offer validation that refutes the cardholder’s claim.
A chargeback claim of the merchandise not being received, for example, would require documentation such as shipping manifests or a delivery receipt signature. Reason codes can be an important clue into areas that need to be addressed. Even failed chargeback disputes can be used as an indicator of areas that the merchant must fix, preventing chargebacks in the future.
Merchants who wish to dispute chargebacks do not have to attempt it on their own. Contact us today; we’ll create a customized plan specially designed for your business.