29 November 2021
5 min read
Chargebacks, or the payment return process, can arise through fraudulent Account Takeovers (ATO), or even through genuine customer transaction queries, but the aforementioned can have an immediate detrimental effect on a merchant through financial loss. The more chargebacks a company has, the closer they edge to the monthly thresholds set by VISA (0.65-1.8%) and Mastercard (1.5%). These thresholds are, of course, measured by what is called the threshold ratio - put simply, the total number of chargeback procedures per month divided by the total number of transactions (100 ÷ 10,000 = 1%). Although both systems vary slightly, regularly having more than 100 chargebacks per month can have serious consequences - simply going over the threshold can result in fines for every subsequent chargeback.
Gaining fines for chargebacks can leave a major dent in the income of any business, but reaching the ill-fated thresholds can result in being cut off entirely from the payment processing system. This in effect, could be the final nail in the coffin for a business that has a major online presence. To not take the chargeback risk seriously is to face the likelihood of ceasing business activities altogether. It’s also important to remember that a chargeback rate is not just a measure of losses, but also a core KPI of the overall success of a business.
When a client requests a chargeback, the procedure will usually go through many stages, which can take up to 3 months and generate additional costs. Thanks to service integration with Nethone Alerts, the laborious chargeback procedure can be avoided, and the request can be solved close to real-time.
Nethone collects all alerts, matches them with specific merchant transactions, and using our API, can send you combined information. You can block a service and refund the end customer to avoid a chargeback claim. After the transaction is blocked or a refund is processed, Nethone provides Ethoca or Verifi with all the notification feedback from you. The chargeback alert providers transmit the outcome to the issuer, and the case is officially closed.
Of course, there is always the worst-case scenario that merchants must be aware of, but there are always solutions available to such problems. To date, this has been to use various fraud prevention methods and alert services, all with varying costs and effectiveness.
You can now receive alerts on challenged transactions by the users (that with high probability will turn into chargebacks) from most of the world’s largest issuing banks seamlessly through Nethone Alerts. Merging two services (Ethoca and Verifi) allows for less integration, and faster reaction time to possible fraud (alerts are not only sent to our customers but leveraged in fraud prevention logic) and prevents you from receiving duplicate alerts (and additional fees), improving your customer experience.
The figures above speak for themselves. Using our Know Your Users™ (KYU) proprietary Profiler and machine learning models, we can effectively prevent payment fraud and reduce chargebacks before they happen, allowing merchants to increase sales. Nethone alerts connect you directly to the issuer early on if there is a problem with a transaction, making a refund before the chargeback reaches you. This way merchants avoid additional operations costs.
Our chargeback solution is already available to all merchants, it’s just a case of whether or not business leaders choose to disregard the ease with which the chargeback procedure can be improved for everyone. The best that can happen is customers notice the effectiveness of the process and their satisfaction results in continued sales and growth. To take effective action is a win-win for all.
If you liked this article and would like to prevent similar fraudulent activities from occurring in your business, Nethone's anti-fraud solution is perfect for you. For more information, write to us via email firstname.lastname@example.org or contact our Head of Business Development Patrick Drexler directly at email@example.com.