ENTERPRISE

CHARGEBACK
MANAGEMENT
Solutions. Strategies. Best Practices.

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Table of Contents
Chargeback Global Chargeback Management
03 12
Impact KPIs to Consider for Success

Enterprise Chargeback Effective Use of

06 13
Challenges Prevention Tools

Enterprise Chargeback Chargebacks Inform

08 16
Solutions Your Entire Operation

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Chargeback
Global Impact
Chargebacks are a problem for all retailers, but
enterprise retailers are facing an unprecedented
impact of chargebacks on their business. Between
July and September 2020, consumers spent about
$199.44 billion online.

While there are external factors for why that number is

so high, it’s not unexpected regardless. Consumers have
been moving online for years, and major enterprise
retailers have been developing sophisticated marketing
and purchasing digital storefronts to support that new
incoming business.

This increase in online shopping leads to an increase

in Card-Not-Present (CNP) purchases online and
on mobile devices, which can, and has, led to a
sharp increase in fraudulent purchases as well as
chargebacks due to fraud and non-fraud reasons.

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Chargeback
Considerations

According to the Federal Research from ACI A survey from A newer form of friendly fraud, called
Trade Commission (FTC), worldwide demonstrates Chargeback Gurus “return fraud,” has picked up steam
credit card fraud is the that non-fraud shows that the increased in the last few years. Here, a fraudster
fastest growing form chargebacks increased use of mobile payment orders an item and has it sent to an
of identity theft. It had by 25% in 2020. options like Apple Pay address without the knowledge of the
already jumped 104% from Common reasons were and Google Pay now inhabitant of the home (or, in some
2019 to 2020 and only rebooking and account for as much as cases, with their tacit knowledge).
grew further due to online non-delivery of items. 5% of chargebacks. The fraudster then asks for a refund
shopping and quarantine. for the item and potentially gets the
item before it is returned (usually by
instigating an address change for
shipping after the refund has been
initiated).

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Data on the Causes Chargebacks can have a huge impact on

the revenue stream of enterprise retailers, so

of Chargebacks much so that many retailers already work with

chargebacks in some capacity. But with the

through 2019*: explosion of chargebacks and fraud, there has

been a concurrent explosion of chargeback
management, prevention, and recovery
solutions on the market to support the needs
of enterprise clients.

Friendly Fraud True Fraud Merchant Error

44.16% 28.28% 18.21%

Inconclusive Customer Error

9.02% 3.82%

*Based on a survey from Chargeback Gurus C H A R G E B A C KG U R U S . C O M

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Chargeback Some of these challenges include:

Challenges Faced
Inability to determine the true ROI of representment
in-house:
Often enterprise merchants use multiple payment

by Enterprise processors, and this brings different status codes between

different processors and banks. Reason codes differ and

Merchants
rules around disputes and arbitration vary between different

and effects across all of those processors, which in turn

Chargebacks are a challenge for any

business. Enterprise merchants, however, Lack of dispute analytics to determine root causes of
face unique challenges that stem from chargebacks:
To understand costs and charges is to understand
both their size and their approach to
root causes, and the best way to learn root causes is
business. Many of these challenges can be to investigate your chargebacks. Enterprise companies
connected to a lack of dedicated focus on are focused on growing business, and many see
chargebacks as a small and necessary cost of doing
the problem of chargebacks and a lack of
business. They often don’t invest in analytics needed to
real data and analytics. catch chargebacks or prevent them before they happen.

Writing off fraud disputes as a cost of doing business:

One myth that persists in enterprise business is that
merchants can’t win fraud disputes. The truth is that
merchants can win, if they approach them strategically.
But developing tailored dispute packages takes data,
expertise, and attention to detail that often isn’t on the
radar of a large retail operation.

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Continued:

Increasing chargeback volume: Keeping up with evolving card network

When chargeback volume is low, companies mandates:
can see it as a cost of doing business. But when To keep up with the fraud landscape, credit
volume rises, fraudsters see that they can card networks are continually changing dispute
approach your business with a chargeback mandates, sometimes as often as every 6
attempt and get away with it—which means
that they will continue to come back. Increased chargebacks face repeated re-training efforts
chargeback volume often becomes an and potentially outdated dispute packages.
exponential problem.

Rise in customer acquisition costs: Increase in true fraud after using a fraud tool:
Disputes aren’t all about fraud. They are Fraud tools can help prevent fraud, but they take
often triggered due to poor customer service,
opaque sales and billing practices, ineffective too high and a fraud tool can turn off customers
refund processes, and other problems. Then, and lower sales. Put them too low, and you will
a chargeback isn’t just a dispute; it is a record see increased fraud and chargebacks. Without
of a lost customer. Enterprise merchants who analytics, enterprise merchants can’t accurately
aren’t paying attention to chargebacks could gauge the relationship between their fraud tools
be driving up their customer acquisition costs. and their chargebacks.

If your enterprise retail operation works under the assumption that chargebacks
are a small and necessary part of doing business, then you run the risk of failing
to face these challenges and losing out on revenue and customers.

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Enterprise
Chargeback Solutions
When experts talk about chargeback prevention and
recovery, they are usually talking about a distinct set of
features, tools, and skills:

Software to collect, Chargeback

analyze, and derive Prevention Alert
insights from data solutions that can
related to sales, fraud, pause chargebacks
and chargebacks to allow for refunds.

Advanced analytics, Chargeback Analysts

often driven by that can help create
machine learning dispute packages for
and AI, that can help chargeback recovery
predict and prevent in cases of friendly
chargebacks fraud

With these different features, enterprise retailers

have three different paths they can take:
Buy, Build, or Outsource.

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Buying an Out-of-the-Box
Chargeback Solution
When you buy a chargeback solution, you are essentially buying a piece of software that can help you and
your team manage chargebacks in house. These usually come in the form of a SaaS platform that you would

Pros Cons

Easy to Set Up and Use You Aren’t Solving the Problem

Many of these solutions are drop-in and use, which can make Working with an out-of-the-box solution doesn’t give you
them easy to manage without needing an entire IT team. expertise or knowledge about your chargeback problems. You
still need the right data and right approach to chargebacks to
Can Often Provide Power and Control get them right. It’s like buying a new car without having learned
If you do know what you’re doing, you can have a lot of how to drive the one you already have.
control — if the solution has been tailored to your business.

Less Expensive Than Other Alternatives

If you just managed a chargeback solution on your own,
then you aren’t paying a team. However, note that these cost
savings may come at a loss elsewhere in terms of customers
and lost revenue.

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Building In-House
Chargeback Management
Pros Cons

Complete Control Over Your Process Incurs Higher Costs

With an internal team, you have complete control over decision If you don’t have this team in place, hiring, training, and
making, process implementation, and execution of chargeback
disputes. Likewise, you also have complete control over any not to mention all the hiring, maintenance, and other incidental
costs to keeping up an entire division in your business.

Avoid Third-Party Vendors Lacks Agility

An outsourced organization can focus exclusively on
chargebacks. An in-house group might have other obligations
enterprise retailers who worry about that third party having
in the organization and can’t react the same ways that a
access to customer information. This is especially true for
dedicated organization can.
enterprise companies in heavily regulated industries like
healthcare.
Requires Manual Attention
Chargebacks are detail-oriented and require a lot of attention.
Leverage a Deep Understanding of Your Business If you do chargebacks in-house, then that person is tied to

how they impact your business might not be better known that you have a high churn rate for chargeback leadership in
by anyone else besides you. With an internal team, you can your organization because it’s hard to hire and retain the right
perhaps speak more readily to the needs of your business people.
operation.

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Outsourced Third-Party
Chargeback Management
Pros

Expertise and Insight

Outside vendors are typically experts at what they do, and they Speaking of tools, most third-party vendors use advanced
chargeback prevention and prediction tools that use machine
chargeback management and fraud prevention. This gives
them the kinds of insight that internal teams might not have. chargebacks but also to prevent them before they happen. Any
provider should be able to give you a dashboard that gives you
Vet Before You Hire an overview of ROI, fraud, and chargebacks.
You aren’t investing into a large internal operation, so you can
evaluate a provider before you go with them. Any chargeback Critical Metrics and APIs for Chargeback
management provider will gladly take 3-6 months of data and Prevention and Recovery
show you where your vulnerabilities and areas of improvement No matter what solution you choose, you should have metrics
are. Likewise, these companies will have built a good reputation in mind to help you measure the success of that solution.
These KPIs can help you better understand your business’s
relationship to chargebacks and fraud, if you are getting ROI
Integrations with Alert Systems for Seamless Experience on your solution, and if perhaps you need to modify or change
A third-party can seamlessly integrate with chargeback your solution for better success.

on your behalf. Likewise, they can use their tools to make

determinations on chargebacks for you, which could mean
lower manual reviews or involvement from your organization.

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Chargeback Management
KPIs to Consider for Success
Here’s what you need to know:

Chargeback Rates: Decline Rates:

This should be a critical KPI for any enterprise This metric is closely related to your chargeback rate.
retailer. When your chargeback ratio is trending How many of your transactions are you declining?
above 1%, you are a high-risk merchant. This can Have you automated your fraud prevention tools,
severely impact your ability to accept payments
thr . Likewise, you chargebacks) or blocking transactions (less
revenue)?
millions of transactions per month.
Fraud to Sales Ratio:
This can help you not only understand how many
aspects of your business that could be impacting cases of fraud you have; you can also determine how
how customers feel: poor security measures, much fraud is costing you, how much of that fraud is
poor customer service, poor transparency during due to friendly fraud, and where that is happening in
refunds, and other communication. your operation.

Chargeback Win Rate: ROI for your chargeback tools:

The number of chargebacks you win is not only This will most likely include a combination of numbers,
important if you are losing chargebacks. Your win including money lost to chargebacks vs. total sales
rate can tell you a number of things, including revenue, friendly fraud vs. true fraud chargebacks,
the effectiveness of your prevention and recovery and successful chargeback recovery on friendly fraud
efforts. chargebacks based on the adoption of new tools.

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How to Make Effective Use of Prevention Tools

Every chargeback tells a story, and if you are working with a chargeback solution and tracking KPIs discussed here,
you are in a good position to start making progress with your chargebacks and any interconnected issues. It’s
critical, however, that you’re using best practices in managing chargebacks, no matter your solution, to make best
use of the method you choose.

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Here’s what you need to know

Learn from your chargebacks to identify Build your fraud prevention and customer service
critical customer support and fraud prevention around your chargeback information.
interventions.
Don’t passively wait for your chargeback
Chargebacks, legitimate or not, are a story about prevention tool to try and recover chargebacks
what’s happening on the frontlines of your retail after they happen. Mobilize your customer
efforts. service to address issues with transparency and
merchant error chargebacks point to areas in your customer satisfaction that lead to friendly fraud.
Upgrade your fraud prevention tools to cut off
fraudsters using stolen cards before they become
a chargeback down the road.

Develop effective dispute packages in case of Leverage modern technology like AI and machine
friendly fraud. learning.

Chargebacks are rising, and according to Loss No matter what solution you go with, utilize
Prevention Magazine, 31% of merchants claim that innovations in machine learning to help you get
friendly fraud is their biggest challenge. Solutions ahead of chargebacks. Advances in AI technology
like third-party vendors can help you tailor dispute are giving chargeback efforts a shot in the arm by
empowering predictive analytics.
and issuing bank expectations.

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Characteristics of The importance of understanding chargeback

prevention isn’t just a revenue-saving measure.

Friendly Fraud 2019*: Chargebacks tell a story and help you understand
your customers. The truth is that friendly fraud isn’t
always predictable, and it doesn’t fall into what you
think you know about fraud:

89% 55.66% 92%

of Friendly Fraud of Friendly Fraudsters of Friendly Fraudsters
cases never go contact merchants initiate chargebacks on
through manual during or before a credit cards vs. debit
review. chargeback. cards.

55% 56% 1/6th

of Friendly Fraud of Friendly Fraudsters Friendly fraudsters
was committed on underwent and carry 1/6th of the risk
the Visa network. matched AVS. assessment as true fraud
culprits.

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Chargebacks Inform Chargebacks show you where your customer service

efforts might let customers and transactions slip

Your Entire Operation Chargeback data can also show you gaps in your
fraud prevention efforts, whether that is preventing true
fraud or optimizing Card-Not-Present transactions to
authenticate and verify real customers.

While many solutions can help you work with this

The lessons here are that chargebacks and your
chargeback solutions can teach you more about working with this data for years. Tools exist, and large
your business than you think. enterprise businesses might see value in building their
chargeback team. A focused chargeback partner,
however, can develop real strategies to prevent
chargebacks, increase customer retention, and lower
costs due to fraud.

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