Chargebacks can seriously damage your merchants and cause significant revenue losses, which is why chargeback prevention alerts are essential for businesses of all types and sizes. But what are chargeback protection systems, and how exactly do they save you time and money? Let’s try to answer this question together.
What Are Chargeback Prevention Alerts?
To understand what a chargeback prevention alert is, we need to give the definition of a chargeback first. So, a chargeback is the procedure of refunding a customer after a dispute. From the customer’s point of view, chargeback is a great service that protects customers’ funds. At the same time, disputes are not good for businesses, especially if they are fraudulent, since they often come with significant money losses and reputation damage. Thus, chargeback prevention alerts, like Verififi or Ethoca, are the tools aimed at preventing disputes at early stages and, therefore, protect your merchants, revenue, and reputation.
How Do Chargeback Prevention Alerts Work?
In general, most chargeback prevention alerts have a similar work algorithm, which is the following:
- The issuer notifies the chargeback prevention alert about a dispute
- A special alert is sent to the merchant
- Merchant issues a refund to prevent the chargeback procedure
- The issuer receives an outcome
Of course, this workflow is generalized, and most modern services have sophisticated alerts that do more than just refund customers before a dispute is issued. So, in the next paragraph, we will talk more about merchant chargeback prevention services and their benefits for businesses.
What Are the Benefits of Chargeback Prevention Alerts for Merchants?
It is needless to say, chargeback prevention alerts have plenty of benefits, so let’s talk about those in more detail.
- Revenue losses prevention. As we have already mentioned above, disputes are costly, which leads to significant revenue losses, especially if we are talking about small businesses. Chargeback back prevention alerts help prevent unnecessary costs and therefore save you money.
- Penalty reduction. Not only do disputes require you to refund a customer, but also come with penalties, which often are pretty high. Luckily, high-quality alerts will protect you against chargeback and, therefore, penalties.
- Time saving. It is a known fact that chargeback prevention systems save a lot of time on processing and resolving dispute requests, which is also a great benefit.
- Approval rate growth. You probably already know that a high approval rate is important for smooth payment processing as well as the security of your merchants. Chargeback prevention alerts help significantly increase your approval rate.
- Improved reputation. The fewer disputes you have — the better your reputation is, which is a pretty obvious benefit of most chargeback protection systems.
Of course, the most significant benefit for most businesses is definitely revenue losses prevention since business is all about making money. At the same time, all the benefits we mentioned above are pretty significant, which makes chargeback prevention alerts worth your attention.
Chargeback Costs and How Do Alerts Save Money?
As we have already mentioned above, chargebacks are costly, but just how much? Well, except for the product or service refund fee (which might also be a problem if you provided a service or sold a product that cannot be returned and resold), there are also many chargeback fees. In particular, depending on the merchant’s agreement with their acquirer, a dispute fee might vary from $20 to $100 for a single chargeback request. That price includes transaction costs, operational fees, as well as marketing and acquisition expenses. For example, let’s say you sold a product that costs $100, and a customer requested a chargeback. If you do not have any prevention alerts, you will pay for the following:
- Transaction value: $100
- Transaction fee (usually 4%): $4
- Product costs (usually 23%): $23
- Marketing expenses (about 35%): $35
- Operational costs (20%): $20
- Chargeback fee: $25
- Total: $207
So, basically, because of a chargeback, a $100 purchase will cost you twice as much. Moreover, you might also get pretty costly fines and penalties if you have too many disputes. Fortunately, chargeback prevention alerts can significantly reduce this cost since most systems prevent disputes and refund customers before a chargeback procedure is started. In other words, you will only lose the product or service value. Additionally, if the product is returned and can be resold, you won’t lose a penny. That’s pretty much how alerts save your money and protect businesses from financial losses.
What Chargeback Protection Services to Choose?
There are dozens of chargeback prevention alerts available on the market today, but some of them are worth your attention more than others. So, let’s take a brief look at the top three chargeback prevention alerts for businesses of all types and sizes.
- Verifi. It is a chargeback prevention alert developed by Visa, which makes it perfect for Visa transactions (though it is compatible with other transactions, too). Verifi offers a wide variety of useful features, such as Rapid Dispute Resolution (RDR), Order Insight, CRDN, Compelling Evidence 3.0, and more. Such functionality provides transaction security and reliable chargeback protection that will save you money and protect the reputation of your business, and you can have all of that within Gemius CRM.
- Ethoca. This dispute prevention service is also an efficient tool for preventing chargebacks, especially for Mastercard payments. Ethoca is a great way to eliminate chargebacks as well as protect your merchants from fraud thanks to its Fraud Insights feature that provides merchants with all the info about declines and disputes. The good news is that you can get Ethoca easily and completely stress-free within Germius.
- Kount. Last but not least, Kount is one of the market leaders that will provide AI chargeback prevention solutions and automated fraud protection for your merchants. Though this service is pretty expensive, it is reliable and definitely won’t let you down.
These were the leaders that are surely worth your attention and, most importantly, money, so pick one of those and won’t go wrong.
Wrapping Up
Chargeback prevention is essential for businesses of all types and sizes since it does help reduce revenue losses. So, no matter if you have a small handmade pottery online store or a large corporation, chargeback protection is something you simply cannot neglect.