By Andrea Montero, Director of Product
Proactively preventing chargebacks is an important step all merchants should prioritize to minimize losses and protect margins.
To build a strong chargeback strategy, it’s important for merchants to consider a variety of interventions, such as leveraging AI to improve win rates and having a chargeback solution that intelligently and efficiently recovers lost revenue. Most importantly, merchants must prioritize reducing the overall number of chargebacks they receive.
Reducing your chargebacks is important for many reasons. First, chargebacks are expensive to dispute. The chargeback fee, lost revenue from the transaction, payment processing costs, and various business costs associated with that transaction mean the total cost of a chargeback is often more than 2x the transaction amount.
Second, fewer chargebacks translates to a healthier chargeback rate, which is important for avoiding payment card chargeback programs, improving authorization rates, and reducing overall payment costs. Even merchants fully covered for their chargeback costs in an insurance model should still prioritize improving their chargeback rates to optimize authorization rates and minimize costs of acceptance with their issuers.
How to Prevent Chargebacks
The first priority for merchants is to minimize chargebacks at checkout by preventing fraudulent or abusive purchases. The best method to prevent these purchases is with an identity-based fraud and abuse vendor, such as Forter. By proactively identifying these transactions before the purchase occurs, merchants can protect themselves from the resulting chargebacks.
For disputes due to first-party fraud or non-fraud disputes, merchants should consider proactively addressing these claims at the time the buyer contacts their bank before they mature into chargebacks. Forter recently partnered with Ethoca, a Mastercard company, to help merchants prevent chargebacks.
Forter and Ethoca Partnership
To help merchants proactively address chargebacks and the resulting business loss, Forter is integrating with both of Ethoca’s solutions, Ethoca Alerts and Ethoca Consumer Clarity™. These solutions allow a merchant to take early action once a customer contacts their bank to place a claim, ultimately preventing a chargeback.
- Ethoca Alerts: Delivers an alert to the merchant in near real-time after a claim has been filed by a cardholder, giving the merchant an opportunity to address the claim and resolve it before it becomes a chargeback.
- Ethoca Consumer Clarity: Deflects first-party fraud chargebacks by clarifying any purchase confusion from likely legitimate customers filing a chargeback. This is done by sharing purchase information such as itemized purchase details and totals, merchant name and logos with the customer via their banking mobile app or even during a phone call with their issuing bank.
This partnership strengthens Forter’s expanding payment partner ecosystem, which provides context downstream to card networks, payment processors and issuing banks to inform key decision points in the payments flow. By innovating with partners in this space, Forter is building a future where merchants and issuers have a shared view of the consumer, enabling trust across the ecosystem and ultimately delivering more value for all parties.
To learn more about the chargeback landscape, register for the upcoming IMPACT conference where experts from Forter and Ethoca will discuss Chargeback Predictability & Profitability: You can have it all.
