Table of Contents
Chargebacks are a pretty common problem for many e-commerce platforms regardless of their size, type, or location. At the same time, a lot of business owners simply do not know how to deal with such a problem efficiently. So, in this article, we will talk about chargebacks and the role of dispute prevention services in modern e-commerce.
What Are Chargebacks and Why Do You Need to Prevent Them?
First of all, let’s define a chargeback. To cut a long story short, a chargeback is a procedure of refunding a customer after a dispute. In fact, it is a great feature that protects customers. At the same time, e-commerce platforms often suffer significant revenue losses caused by disputes and fees they usually come with, not to mention costly penalties. Moreover, a lot of chargeback requests are fraudulent, which makes it even more painful for businesses. Thus, no matter if you have a small online store or a large corporation, chargeback prevention services are something you simply cannot neglect.
How Does E-Commerce Suffer from Chargebacks?
We have briefly mentioned that chargebacks aren’t good for e-commerce business, but what exact problems do they cause? Here are some common problems disputes bring:
- Revenue losses. Any type of chargeback always comes with revenue losses since, oftentimes, you end up losing twice as much of the initial purchase cost. For example, if you receive a chargeback on a $100 purchase with all the fees (transaction value, transaction fee, product cost, marketing expenses, operational costs, and chargeback fee), you will lose about $207, and that’s just one chargeback. So, if you have too many disputes, you will lose a significant percentage of your revenue.
- Approval rate decrease. Too many disputes have a pretty negative impact on your approval rate. That leads to transaction failures, which, in turn, affects your conversion rates. So, basically, without a properly working payment system, you will lose your potential customers and, therefore, money.
- Penalties and fees. As we have already mentioned above, chargebacks come with plenty of fees and penalties and there is no way to avoid those, except for using a dispute prevention service.
- Merchants closure. Finally, in the worst-case scenario, too many chargeback requests (regardless if those are genuine or fraudulent) can lead to merchants’ closure. Dealing with such a problem is always challenging and money-consuming, so it’s best to avoid it.
Disputes are indeed particularly dangerous for e-commerce and not only, especially when it comes to financial aspects and revenue. Thus, it’s best to prevent them and protect your business from unnecessary expenses.
Chargeback Prevention Services: Definition, Workflow, Benefits
Modern chargeback prevention alerts are the best way to fight disputes and fraud, but what exactly are they, how do they work, and what benefits for e-commerce business owners do they have? Let’s find out together.
Basically, chargeback prevention alerts are special services that detect disputes before the procedure is started and prevent them (usually by automatically refunding a customer). In addition, such systems help fight fraud, which also leads to fewer chargeback requests. As a rule, most chargeback prevention alerts have the following workflow:
- 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, it looks like dispute prevention systems are pretty basic and aren’t worth their price. However, these systems are more sophisticated than they seem at first sight, and they do efficiently fight fraud and disputes. So, we do believe that they are worth their sometimes high price.
In terms of benefits, chargeback prevention systems have plenty. In particular, if you have a dispute prevention service on your e-commerce website, you will enjoy the following benefits:
- Improved reputation of your business
- High approval rate
- Penalties reduction
- Revenue losses prevention
- Smooth payment processing
- Fraud protection
This list of benefits is not too long, yet each of these advantages is pretty important for any type of e-commerce platform, and every business owner knows that. So, we said it once, and we will say it again — chargeback prevention alerts are worth it.
What Dispute Prevention System to Get?
Today, we have a vast choice of dispute prevention systems to choose from, yet such a great selection makes this choice even harder. This is why we offer you to take a brief look at the three systems our editors’ team approved of.
- Verifi. This chargeback prevention solution from Visa will perfectly protect your merchants and provide the best payment experience for your customers. The solution has plenty of useful features, including Rapid Dispute Resolution (RDR), CRDN, Order Insight, and Compelling Evidence 3.0, which provide excellent chargeback and fraud protection. Plus, Verifi is available within Gemius CRM, which makes it even more accessible, especially for small businesses.
- Ethoca. Just like Verifi, Ethoca is a great chargeback prevention solution that will help you cut costs and secure your merchants. Though this system is mainly used for Mastercard payments, it is still a pretty decent option since it offers plenty of unique features, such as fraud Insights and CNP fraud protection. Finally, Ethoca is available within Germius as well.
- Kount. Using AI tools, Kount provides pretty decent protection against chargebacks and fraud, therefore, saving your time and money and protecting your merchants. Though this prevention system is pretty expensive (the minimum monthly fee is $1,000), it is still worth your attention since it does provide reliable protection.
Certainly, we do not insist on getting one of these three prevention alerts, but we want to emphasize that these are the solutions that will not let you down. Plus, Ethoca and Verifi are both available within Germius CRM, which makes them even easier to install.
Final Word
Chargeback prevention is extremely important for e-commerce platforms since it protects them from fraud and revenue losses. Of course, you can run an online store without a dispute prevention system, but we highly doubt that in this case your store will bring any profits or survive at all.
Also Read: Everything You Need to Know About Digital Certificates
