So far in this series we’ve examined the growing tide of chargebacks, the rise of subscription services, and the relationship between the two. We’ve learnt that, when consumers use chargebacks to cancel payments, the costs to subscription service providers can be onerous.
All of which begs the obvious question: what can those businesses do about it? As we’ve already seen, heavy-handed responses to chargebacks can be expensive, both financially and reputationally. Administering and challenging chargeback claims are a continual drain on company resources. If you get too many chargebacks, payment processors and card networks can even put your business on a blacklist.
In which case, should businesses just let chargebacks slide? Is it better to take the hit and move on? Some businesses think so. According to our own research1, nearly 40% of merchants don’t bother to fight merchandise or service not rendered chargeback claims.
But this ‘head in the sand’ approach is becoming increasingly unrealistic as chargeback volumes mount. Over half (51%) of merchants say chargebacks are increasing2. We also found that, for every $30 in chargebacks, merchants might lose $32 in wasted labour, $27 in chargeback fees, and $12 in dispute resolution fees3.
This is an unsustainable situation and subscription service providers are crying out for a solution. Luckily, there is one.
Customer experience is key: make everything simple
To reduce chargeback volumes the service should be straightforward to navigate any required changes. When genuine customers can alter or temporarily suspend their subscription without fuss, they’re less likely to trigger a chargeback to block payment. Chargeback management is as much a customer service challenge as it is a financial or technological one, especially when consumers know that the cost to merchants of disputing a chargeback is probably more than the cost of the cancellation.
It is a similar story with communication. The easier your customers find it to get in touch with you, the less likely they are to grow frustrated. Customer service channels should be heavily signposted, continually monitored and offer guaranteed response times. Customer churn is never good news, but trying to reduce it through equivocation, delay or confusing processes will only make matters worse.
A good experience extends to what customers see on their bank statements. Studies have found that most consumers want more detailed transaction information on receipts, banking apps and bank statements4. When you give them that detail, they’re less likely to fail to recognise a charge, which in turn reduces the chances of a chargeback.
Automating chargeback management
Nevertheless, many consumers see chargebacks as a quicker and easier route to redress than customer service channels. In which case, the most robust line of defence against mounting chargeback costs is automated chargeback management.
A chargeback management process needs to achieve the following:
1. Respond quickly to retrieval requests and chargeback alerts to avoid further action.
2. When a chargeback happens, decide whether to accept liability or fight it.
3. Whilst challenging a chargeback, prepare evidence and present it in a concise rebuttal letter.
But that’s not all. If you want to reduce the number of chargebacks you have to deal with in future, you need to track the relevant data and look for trends and patterns that point to sources of customer confusion, frustration, or fraud.
Doing all this manually is time-consuming, resource intensive and error prone. It offers little added value in terms of business intelligence. Automating chargeback management adds efficiency, reduces costs and brings your valuable data into play to decrease future chargeback volumes.
Chargeback automation at work
Automating chargeback processes means merchants rarely need to get involved in their day-to-day management. Here’s what a modern, state-of-the-art chargeback management solution can do, based on a set of predetermined (and even better, AI-refined) rules:
- Pre-chargeback. In the pre-chargeback phase, an automated solution can respond to alerts, determine whether to accept liability and issue refunds and notifications if required. Machine learning technology can help it refine this decision-making process over time.
- Challenging chargebacks. If the solution determines that a challenge is warranted, it can automate the collection of evidence and submit it to relevant parties.
- Post chargeback. After a chargeback, the solution can integrate with other systems (like CRM) to automatically cancel billings, block future purchases if fraud is suspected, and create reports detailing the sources of chargebacks, outcomes from challenges, and more.
Automation is not a magic bullet and can’t do everything. There will still be unusual chargeback cases that require human intervention, most likely over whether to accept or fight a non-standard claim. But automation can hugely reduce the time spent on managing chargebacks and fighting them. If you’re the sort of business that attracts a lot of unusual chargeback claims, it’s possible to choose a hybrid solution, which combines automation technology with the skills of a chargeback analyst.
Modernising chargeback management
In a tough economy, more consumers want to “try before they buy”, take advantage of free or low-cost promotional periods and cancel subscriptions they can no longer afford. Fraudsters are looking for ways to exploit these trends too. It all leads to a growing wave of chargebacks.
Too many subscription services are meeting this challenge with outdated manual processes and legacy technology. That means they’re managing chargebacks inefficiently, which piles on costs, or ignoring them, increasing the potential for financial and reputational damage.
Neither is sustainable as chargeback volumes grow. Automating chargeback management is the answer, responding to alerts and disputes economically, efficiently, and in the most appropriate ways.
Interested in learning more about automating chargeback management? Request a consultation.
- Accertify. 2021. https://www.accertify.com/white-papers/merchant-chargebacks-fraud-survey-2021/
- Accertify. 2021. https://www.accertify.com/white-papers/merchant-chargebacks-fraud-survey-2021/
- Accertify. 2021. https://www.accertify.com/white-papers/improve-chargeback-wins-reduce-loss/
- Aite. 2018. The Global Chargeback Landscape: Rapidly Evolving https://aite-novarica.com/report/global-chargeback-landscape-rapidly-evolving