Transaction Dispute Approaches: Protecting Your Bottom Line
When your business loses money to first-party misuse — losses caused by your own customers getting around or avoiding your company’s established policies — a card transaction dispute is often the first sign of trouble. When a customer makes a transaction dispute with a bank or credit card issuer and it’s upheld, the result is a costly chargeback.
By gaining a deeper understanding of the motives and circumstances that may be causing your customers to lodge disputes, you can become more adept at stopping them before they start. The use of tech-based solutions helps you win disputes, assists with negotiations, detects when people are acting in bad faith and flags criminal fraud at play.
With over 105 million charges disputed in the U.S. in just one year — and the number expected to rise by 40% by 2026 — acting now is an important precaution.1 Rather than letting the resulting chargebacks stack up and damage your bottom line, it’s best to be proactive when addressing transaction disputes.
When and Why Do Transaction Disputes Occur?
A transaction dispute can take time to occur. Weeks after a customer has made a purchase, or been charged for a recurring subscription, the charge appears on that person’s credit card statement. This is when the buyer may be confused by an unfamiliar name or a surprising amount and decide to dispute — or succumb to buyer’s remorse and ask for a reversal, despite knowing they bought the service.
A concern for businesses, this process is common. Half of consumers say they’ve investigated a card transaction appearing on their financial statements and 24% because they didn’t recognize the source of the charge.2 The risk for your company is that if they are unable to determine the source of a mysterious charge or unwilling to make a long search, the consumer will simply file a transaction dispute.
If too many of these payment disputes come through — and card providers approve them, triggering chargebacks — your losses can stack up. Without strategies and tech resources in place to manage and win disputes, it can be difficult to counteract the issues.
First-Party Misuse as a Shortcut for Consumers
Good-faith confusion about the source of a transaction isn’t the only reason a customer might file a dispute. If consumers perceive too much difficulty in unsubscribing from a service or returning goods, they may use a transaction dispute to reverse the charges rather than following the cancellation procedure.
Transactions can come through flagged as “fraud” because that is more serious than the real reason, and thus likely to be honored. This could be as simple as buyer’s remorse and an unwillingness to use the normal methods to cancel a subscription or make a return. An epidemic of false fraud reports can muddy the digital waters, making it unclear whether to challenge a transaction dispute or whether it represents real fraud.
With 35% of customers saying pausing their subscriptions is somewhat or very difficult, this is another area to monitor.3 If your business relies on recurring revenue for a large portion of its business, a pattern of repeated transaction disputes leading to chargebacks can cause significant problems. This is especially true if the volume becomes so great that it causes friction between your business and payment card providers.
First-Party Misuse vs. Organized Fraud
Types of transactions in which confused or disgruntled customers dispute transactions are different from those carried out by organized fraud rings in one important way. You can prevent some customers from committing “friendly fraud” by providing them with alternatives that are more appropriate. Malicious cybercriminals, who were never good-faith customers in the first place, will continue their schemes even if transactions are well-annotated on receipts and there are acceptable cancellation or refund policies.
Despite the differences in intent, multiple kinds of loss begin the same way: with a disputed charge. Learning to counteract and prevent these disputes is an essential step in protecting your profitability.
What Are the Keys To Reducing and Winning Transaction Disputes?
There are two key points where you can take action to reduce instances of transaction disputes against your business and manage them. By inspecting the way you present your products and services, you can cut down on first-party misuse and “friendly fraud” before they begin. By implementing automated systems and procedures, you can act against disputes that get through.
Reducing Instances of Transaction Disputes
When considering ways to cut down payment disputes made because of customer confusion or those made from frustration or buyer’s remorse, the best solutions may involve changes outside of the actual payment process.
One key step in stopping honest mistakes is to inspect the way your company’s descriptor, location and phone number appears on bank statements. Is the entity name associated with your business clearly identifiable? A misalignment between your name or location and the line items appearing on credit card statements can be a major cause of confusion.
Once you’ve clarified the way your company appears on card statements, it’s time to consider other relevant factors, including refund policies and cancellation options. Since difficult or complex procedures can lead to excessive disputed transaction rates, it’s best to create a user-friendly customer experience. Counteracting frustration before it begins is simpler than challenging transaction disputes.
Even the best preparations may not fully stop customers from using transaction disputes and false fraud reports as a substitute for legitimate cancellations or refunds. To sort out these cases from actual fraud and help you challenge them, you’ll need a tech-based solution to tell the difference with time and manual effort from your team.
Contesting and Winning Disputes
Of course, even companies with well-designed policies and procedures will still encounter some transaction disputes. Eliminating 100% of good-faith incidents leading to a disputed charge isn’t a cure-all, as that doesn’t account for either actual organized fraud attacks or customers using fraud reports as a cover for their buyer’s remorse.
You need to make sure your system for fighting transaction disputes is reliable and repeatable. A technological solution that automates the process of gathering supporting documents and allows you to deal with payment card providers with minimal effort is ideal for this purpose.
Winning disputes means using advanced signals to pick up on which ones can be won, as well as creating a streamlined system to save time and effort for your team members as they file the necessary information. Tech has a role to play across the board.
How Do Tech-Based Solutions Help With Transaction Disputes?
Technological solutions for dispute management are a necessary reaction to the fast pace of modern business. If your company operates in a space such as ecommerce, gaming or subscription services, the sheer number of digital transactions you carry out provides numerous opportunities for disputes that could escalate into chargebacks. You need to be prepared to prevent and fight disputes at that scale. Purpose-built digital solutions can aid in payment dispute management and chargeback prevention. A powerful platform can combine these multiple parts to provide end-to-end protection for your revenue.
Early Warning
Automated alerts, dispute deflection and real-time response functionality can help you cope with disputes at the speed they occur. While you can’t stop every transaction dispute at its origin, cutting down their number is an important way to save additional work. Taking down as many disputes as possible early, if the cost doesn’t outweigh the savings, is a strong precautionary approach for any brand.
Clear Attribution
Using contextual data to determine which transactions are likely to be true instances of fraud against your customers, and which come from simpler motives such as buyer’s remorse, is an essential part of winning disputes. This level of detection allows you to quickly sort transactions into categories — some that can be won because they don’t truly represent fraud, and some that are legitimate.
Detailed Analysis
There is real value in being aware of transaction disputes as they occur. Knowledge is power when it comes to customers contesting charges. If you see patterns around specific products or services that indicate that consumers are consistently refusing to use standard refund methods, you can investigate what might be causing those actions, leading to clearer policies.
Fast, Efficient Disputes
Responding to a credit card dispute doesn’t have to be difficult. Automation and templates are useful in this regard, cutting down on the amount of manual work needed to respond to disputes for speed and efficiency. Furthermore, if your chargeback management provider offers direct integration with payment providers, this gives you a better chance of having your responses heard and processed efficiently.
Traits of an Effective Platform
In addition to offering the ability to battle transaction disputes as they occur, ideal solutions for chargeback prevention and management will also be flexible and able to adapt over time. The policies and processes offered by payment providers today may change in the months ahead, so your solution will have to evolve.
Expert support is also useful. Rather than fully relying on technology tools, it’s important to acknowledge the human element of managing every behind-the-scenes process, from assessing which disputes to contest to spotting patterns and managing collaboration with payment providers. Credit card dispute prevention and resolution are processes that demand this level of focus because of their large potential impact on your organization’s future cash flows.
Win Transaction Disputes With Chargeback Management Solutions
As the payments space continues to evolve — and fraud along with it — Accertify is the ideal partner to help your organization prevent transaction disputes from becoming chargebacks. Our combination of high-tech solutions and industry expertise allows you to keep up with first-party misuse, attacks by malicious outsiders and everything in between.
Working with Accertify makes the dispute process more efficient and straightforward, preventing your internal team from becoming mired in long manual processes while also safeguarding your bottom line. You can get better results with fewer people working on dispute management. With integrations with 60+ acquirers and processors and merchant-specific payment dispute templates, we’re ready to simplify your revenue recovery operations.
In addition to fighting disputes — protecting your profits wherever possible — teaming up with Accertify allows you to analyze patterns in your transactions and chargebacks. This knowledge can help you decide briefly what to challenge and inform policy and operational process changes, ensuring you’re providing an optimized customer experience that discourages first-party misuse from the start.
The results of this approach are clear from experience. Air France transitioned its chargeback handling to Accertify, which cut related costs by 60% while also saving 20% of the time previously spent managing disputes.4 When brands have a strong way to lower disputed transaction rates, it changes the math around chargebacks and online products and services in general. Take control of your bottom line and move at the speed of right with Chargeback Management from Accertify.