We’re well into the 21st century and you’d think that world markets would have online payments and transactions sussed by now, wouldn’t you? Fraud free experiences, super efficient service with customer satisfaction at the forefront of every payment, and of course, increased revenue for merchants... but we’re not quite there yet. Unfortunately, there are still merchants out there that don’t have an effective fraud management system in place, or worse, none at all. Those that do take the issue of online payment fraud seriously tend to employ a no. of anti-fraud methods that can become costly and inefficient to merchants, end-customers and credit/debit card issuers. One key area of friction is the chargeback process. Is it possible to effectively manage and reduce chargebacks?
Breaching thresholds can break a business - it's time to reduce chargebacks
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, regulalry 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 to reach 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.
How does it work?
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, matching 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.
What’s the Chargeback Solution?
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, 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 Advantages for Merchants
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.
The advantages to using Nethone Alerts are numerous...
Merging two services (Ethoca and Verifi) with Nethone allows for less integration and faster reaction time to possible fraud.
All alerts are 100% confirmed between the card issuer and the cardholder.
Avoid chargebacks as well as shutdown compromised accounts and suspend services.
Prevent receipt of duplicate alerts (and additional fees).
Nethone matches particular transactions with alerts and serves you a full scope of transaction insights.
Pay only for the chargeback alert that has been used.
React to fraud quicker and update machine learning models faster.
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 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 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 Business Development Lead Maciej Jamiołkowski directly at email@example.com.