Chargebacks911 is an end-to-end chargeback managment and risk remediation firm. It uses proprietary technology to help merchants prevent chargebacks, and also guide them through the chargeback representment process when necessary.
We conducted a wide-ranging interview with Monica Eaton-Cardone, COO and co-founder of Chargebacks911, where we covered a lot of ground about the kinds of errors merchants make that end up causing chargebacks. The topics we discussed include chargeback ratio targets, what a proper prevention strategy looks like, and how to keep up with changes in fraudster technologies.
1. When merchants think of chargeback prevention, they think solely of fraudster attacks. But you claim merchants’ own actions are also at least somewhat responsible — a notion many of them would push back against. If you could say one thing to convince merchants their actions are making the problem worse, what would it be?
I’d simply say that nobody’s perfect, and from time to time, sellers will make mistakes. Keep in mind these aren’t huge errors we’re talking about. On the contrary, it’s usually a small misstep that snowballs and causes problems. For example, a merchant may not have optimized their billing descriptor. Or, maybe their return policy is a little confusing. These minor inconsistencies can lead to a chargeback.
If you break a dispute down to its most fundamental attributes, you’ll see that each one can be traced back to one of three basic causes. Criminal fraud, where bad actors deliberately complete transactions with stolen information, and friendly fraud, occurring when seemingly-legitimate buyers file chargebacks, represent most disputes. However, we at Chargebacks911 project that between 20-40% of disputes are products of merchant error.
2. Along the same lines, we ofter hear frustrated merchants say that chargebacks are just “the cost of doing business”. Given the reality that eCommerce fraud prevention is never foolproof, why should they use resources or go through the trouble of changing their behavior, just to fight the inevitable?
That’s simple: because in the overwhelming number of cases, you can do something about it.
Merchants can prevent both criminal fraud and merchant error chargebacks by changes to their operations. Identifying potential triggers in their operations and customer lifecycle, while also applying strong authentication and antifraud tools, can detect and stop chargebacks before they’re filed.
t’s true that you can’t really prevent most friendly fraud. It’s predicated on being a seemingly-legitimate sale…until it isn’t. You can fight friendly fraud, though, by submitting a representment and recovering the sale.
3. What would you say is a reasonable target ratio of chargebacks to order volume the average merchant can shoot for?
Keeping one’s chargeback ratio under 0.5% of sales is a good target. Anything above that and you’re in danger of breaching chargeback thresholds, and your acquirer could simply close your account. That said, you don’t want to just shoot for the bare minimum to stay afloat. Rather, you want to try and get your chargeback ratio as low as possible.
4. Merchants talk a lot of about chargeback prevention, but less about winning disputes. Can you talk a little bit about the relationship between strategies for stopping chargebacks and increasing win rates. How do they overlap, and where do they diverge?
Fighting chargebacks and preventing chargebacks are two aspects of the same strategy. On the one hand, criminal fraud and merchant error chargebacks are all about prevention. You can’t dispute a chargeback after a genuine criminal fraud attack, or after a misstep on your part. But with friendly fraud, which accounts for most chargebacks, disputes are the only way to really address the problem.
Over time, disputing friendly fraud will incentivize banks to exercise more due diligence before filing disputes.
5. What are some of the common mistakes you see merchants making when they are creating their own chargeback prevention and dispute strategies?
I think targeting is the biggest problem. Merchants don’t have access to the broad scope of industry data that a chargeback management service might. Instead, they only have limited internal data. As a result, they tend to be reliant on chargeback reason codes for developing a strategy, which won’t work, as friendly fraud disputes operate by flying under the radar and misrepresenting themselves.
6. Once merchants commit to doing better, what are some of the procedures they should put in place?
There are literally dozens of different tools and strategies one can implement to mitigate chargebacks. Developing a multilayer strategy for criminal fraud is important. Using multiple tools like AVS, CVV verification, 3-D Secure, and geolocation create redundancy and multiple checks with minimal transaction friction.
Merchants should also do a detailed examination of all customer service policies and procedures to identify potential issues. For instance, rapid live response across multiple channels—phone, email, social media—is vital.
We actually released a free digital guide a few years ago that outlines simple, pragmatic steps to prevent chargebacks.
7. The credit card industry is highly regulated. In fact, it’s old consumer protection regulations that create the chargeback issue in the first place. What should merchants understand about the current role of legislation/regulation in their day to day efforts to fight their chargeback problem?
Policy is often developed with good intentions, but inconsistent execution. That’s the case with chargebacks, as with many other facets of the payments industry.
The most important thing to remember is that chargebacks were developed for a pre-internet age. The process is not responsive to the dynamics of the eCommerce environment. While there have been attempts to modernize the process like the Visa Claims Resolution initiative, policy will always lag behind the technological curve.
8. Switching focus a bit, another aspect of chargeback prevention merchants sometimes must contend with is unhappy customers that use chargebacks as a refund mechanism. What are some best practices you can offer for preventing that kind of abuse?
This behavior would fall within the purview of friendly fraud. However, the underlying issue is the unhappy customer, which could fall under the purview of merchant error.
As mentioned above, a consistent and responsive approach to customer service is one of the best chargeback solutions. Respond to customers’ email inquiries with an automated reply letting buyers know their message was received, and make it a goal to answer to all email and social media questions within an hour. In addition, try to answer phone calls within three rings, and have a live representative on your end.
9. Talking big picture now, merchants are under a lot of pressure to accept an ever-increasing number of digital payment types susceptible to different kinds of fraud. Are there any best practices you can offer to help them protect themselves from these new technologies?
It’s hard to recommend any firm strategies considering the pace at which technology changes. For example, mobile wallets are a fast-growing tool, and despite misgivings that many have about them, they’re actually much more secure than a conventional card-not-present transaction. As I say that, though, developers could be working on an entirely new direction for the technology.
The thing to remember is that, despite new eCommerce fraud prevention tools, the fundamental of customer service and security best practices don’t change. The goal is to positively identify customers, and provide them with quality service.
10. To conclude, what are some of the fraud trends you are seeing that merchants might not realize they need to start looking out for?
Of course, friendly fraud is always at the top of the list. The issue is how it can take different forms; for example, the popularity of games like Fortnite, which rely on microtransactions, is causing a surge in activity describes as “family fraud.” This occurs when a close relative of the cardholder makes a purchase, and the cardholder responds by filing a chargeback.
Generally, merchants should be cognizant of the fact that any new technology can be exploited by fraudsters. Before embracing a new payments tool or some other innovation, consider how it fits into your overall fraud strategy.
Monica Eaton-Cardone developed Chargeback911’s robust chargeback-mitigation solution, which combines human insights with agile technology, that is now used by thousands of companies worldwide. She is a recognized fintech thought leader and premier payments industry expert, as well as a vocal advocate for women in STEM fields.
She was just named Global Leader of the Year at the 2019 Women in IT Awards, and has been the recipient of dozens of global and national IT and payments industry awards. She also finds time to give back to the community as founder of the nonprofit Paid for Grades, which supports and motivates underachieving students in Pinellas County schools.
Chargebacks911 is a proprietary end-to-end chargebacks prevention and remediation solution made by merchants, for merchants. They use a combination of intelligent source detection, tactical chargeback representation, and merchant compliance reviews to help boost ROI.