If you’re trying to build a profitable business, you’ve spent countless hours ideating and refining a strategy that gets you the best ROI with the lowest risk. But if you’re not protecting yourself from sneaky back-end costs like chargebacks and chargeback fees, you might end up with a bottom line that’s more like rock bottom.
Note: The following article contains sponsored content. If you’re trying to build a profitable business, you’ve spent countless hours ideating and refining a strategy that gets you the best ROI with the lowest risk. But if you’re not protecting yourself from sneaky back-end costs like chargebacks and chargeback fees, you might end up with a bottom line that’s more like rock bottom. So, what is a chargeback and how can it be so damaging? Chargebacks occur when a bank voids a (supposedly fraudulent) credit card transaction, withdraws funds from the charging party’s bank account, and applies credit to the victim’s statement. Chargebacks exist for the customer’s protection, which is great—as long as it doesn’t hurt your company. That’s where chargeback protection and insurance come in. Here’s everything you need to know about the risks associated with chargebacks and your options for staying safe.
Some might think that their company isn’t vulnerable to chargebacks. While chargebacks are more common for “shady” businesses, they can affect any company, no matter how legitimate the operation may be.In most cases, honest business owners see chargebacks as a result of “friendly fraud”. Those who commit friendly fraud place orders online, then contest the charge as soon as they receive the goods. If the chargeback is completed, companies not only lose the product that they shipped, but the money they received from the customer as well. Companies offering subscription services are especially vulnerable to chargebacks, as many customers simply forget that they signed up for recurring charges.It’s also not uncommon for customers who are dissatisfied with a product or service to begin chargeback proceedings. The same goes for customers who feel they have been overcharged. In these cases, the correct course of action would be to go to the merchant directly, but not all customers know (or follow) these stipulations.Though one or two chargebacks might seem insignificant, the cumulative effects of multiple chargebacks on your business can be disastrous. They damage your company’s reputation and might even result in your merchant accounts being frozen or terminated.Even if you manage to sidestep those consequences, the cost of repeat chargebacks will very quickly take a bite out of your profits. On top of the lost revenue, you’re looking at a fee of at least $25 every time—whether the chargeback is justified or not. That is, unless you’ve got backup.Below are four of the best chargeback providers to consider for your business, along with some tips on how to be sure you pick what will work best for your situation:
Signifyd is favored by large enterprise commerce brands like Dick’s Sporting Goods and Best Buy, so you know they can be trusted to be fastidious with your transaction details no matter how big your company grows. But they’ve got a sweet deal for small businesses, too. No monthly contract, full chargeback protection, and all approved orders charged at one percent. What does that get you?Signifyd protects you in case of fraud or unauthorized charges, and stolen account/financial information. That means you’re still liable if a chargeback is the result of merchant, card processor, or shipper error; if the item was defective or incorrect; if a refund wasn’t processed; or if duplicate charges have been made. For any illegitimate chargebacks, once you receive notification of a chargeback, you’ll fill out a simple web form. Once you submit it, Signifyd guarantees you’ll be paid back within 48 hours—including chargeback fees and shipping costs. On top of chargeback protection, they offer cancellation guarantees so you only ever pay for orders that you’re getting paid for.
Verifi is one of the bigger chargeback protection providers and often wins awards for user experience. While they can’t always reverse the chargeback, they have proprietary tools that help to minimize or eliminate chargebacks and the associated consequences (like higher processing rates and funds being frozen) before they occur.As soon as a consumer contacts their card issuer/bank instead of the merchant, their Order Insight tool provides the issuer with merchant CRM and order details in real-time, so that all parties have the relevant information. Customer and issuer also receive the merchant’s contact details ASAP.Their Cardholder Dispute Resolution Network tool facilitates real-time communication between merchant, issuer, and customer. It guarantees timely notification from the issuer to the merchant, and the “closed loop” system actually pauses the chargeback process for 72 hours. Translation: you can review/resolve issues before they become chargebacks.
Ethoca takes a similarly collaborative approach to resolving unwarranted chargebacks before the merchant gets hit with them. The Ethoca Eliminator tool connects issuers to merchant order and account history details in real time, so they can effectively engage in a real-time conversation with cardholders whenever a dispute comes in. When it works, merchants benefit by recovering the sale, gaining higher future card acceptance rates, and avoiding the chargeback and/or chargeback reversal process altogether.For any chargebacks that aren’t eliminated before they hit the merchant, Ethoca’s Enhanced Representment service uses rules set by the merchant to determine which to fight, collects the evidence, and processes the chargeback reversal in real time in an effort to maximize the recovery of revenue.
Midigator is a data-driven chargeback and risk-management solution. Their technology monitors merchant accounts in real time and provides customized dashboard and email notifications for exactly the info you want—from approaching chargeback count thresholds, count ratios, volume ratios and a dozen other metrics. Plus, their predictive algorithms forecast results and trace issues back to specific metrics, so you can spot vulnerabilities ASAP. When it comes to fighting chargebacks, Midigator uses a totally automated, precise system to fight chargebacks instantaneously and accurately—with zero human intervention. So, if you have a growing business, or several businesses to manage within your portfolio, Midigator’s insane data analytics/management and no-effort chargeback rebuttal make for an attractive package.
These are just a few of the chargeback protection providers on the market today, and each one is a bit different. What works for someone else’s business might not work for yours, and trying to find the best one can be totally overwhelming—unless you tag in Swipesum. Swipesum will curate a list of providers that meets your needs and make them bid for your business so you get the lowest possible rate—totally free of charge. It’s super-easy to get started, it’s free, and we work with businesses of any size.
SCHEDULE a CONSULTATION
Meet one of our payments experts to see if working together makes sense.
We will schedule a quick consultation call to go over how you're currently handling merchant services at your bank, show you our menu of options, and plan for a successful launch.
Start with a free audit of your payments processing statements
Connect with a payments expert and get a free initial consultation