Disputes and Chargebacks: Overcoming the Challenges of 2024

Here are some suggestions on how to address these newly emerging threats. 

Add more protection

If you allow customers to create online accounts, you’ll want to protect those accounts at multiple stages: 

• Put protections in place for account opening to make sure real people are creating accounts for the right reasons. 
• Protect accounts throughout their lifetime to stop fraudsters from taking over.  

3D Secure 2.0 is another layer of protection that might be a good fit for your business. 3DS2 can help verify the identity of customers and shift liability for chargebacks. Just make sure you understand what the solution is and isn’t capable of before you add it to your strategy. 

Reach out if you’d like to learn more about how to incorporate either 3DS 2.0 or account protection into an end-to-end chargeback management strategy. 

Review and update rules regularly

Rules have become a hot topic in the fraud world. But there are a lot of misconceptions out there. Don’t be misled: rules are necessary — and good. 

Make sure you are regularly reviewing your rules and making updates to address emerging trends. 

NOTE: If you are working with a service provider that makes rule management difficult or is limited to out-of-the-box options, it might be time to make a switch! 

Take action sooner rather than later

It’s not a good idea to wait and see if potential threats will become a reality. Just assume fraudsters will hit your business eventually and act proactively. 

A Kount client explains it best: 

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Here are some suggestions on how to address evolving consumer behaviors.

Enhance your customer service strategy

A chargeback prevention strategy is basically a really intense competition. 

Who can provide the fastest and most satisfying resolution for a cardholder’s problems? 

You or the bank?

To win that competition, you need to continuously review and enhance your customer service tactics and policies.

Identify the different points throughout the customer journey where issues might pop up and then proactively try to solve them. Be creative and personable with your approach to problem solving.

Use Verifi’s Order Insight + Leverage Visa CE 3.0

Order Insight is a chargeback prevention solution specifically designed to expose and stop friendly fraud in real time. If you are able to send clarifying information to the issuing bank when a transaction is disputed — like product details, delivery information, and purchase history — then the cardholder complaint can usually be talked off.

Of all the chargeback prevention solutions available, Order Insight has the highest ROI and is the easiest to manage. 

• ROI - Disputed transactions can be resolved without a refund. This means you can retain more revenue. 
• Management - Once integrated, Order Insight is a fully automated solution. All you have to do is review the outcomes. 

Plus, Visa recently unveiled a new initiative to further protect merchants against friendly fraud. If you send specific Visa CE 3.0 data elements in your Order Insight response, the fraud dispute will be blocked — guaranteed.  

We’ve already seen data trends that indicate Visa CE 3.0 is positively impacting friendly fraud rates. And as adoption increases, outcomes will continue to improve. 

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In fact, since the launch of the Visa CE3.0 rule update, Order Insight has deflected more than $30 millions dollars — putting money back into merchants’ pockets.

NOTE: Some service providers can offer Order Insight. However, Kount is one of just a few providers able to collect and incorporate Visa CE 3.0 data elements into an Order Insight response. Because of our unique capabilities, Kount is Verifi’s preferred provider for Order Insight.

At Kount, our pricing is based on positive outcomes — you only pay if the chargeback is prevented. So you have absolutely nothing to lose if you use Order Insight through Kount. 

Refund disputed transactions

Order Insight is a valuable prevention tool, but that doesn’t mean it’s a good fit for all businesses or situations. Sometimes, it’s best to simply refund a disputed transaction — especially if you have a high chargeback-to-transaction ratio and are in danger of breaching card brand thresholds. 

Both Verifi’s Cardholder Dispute Resolution Network (CDRN) and Rapid Dispute Resolution (RDR) solutions enable you to avoid chargebacks by refunding customer disputes. In fiscal year 2023, CDRN and RDR combined have resolved nearly $700 million in pre-disputes.

Use AVS and CVV

Technically, Address Verification Service (AVS) and card verification values (CVV) are identity verification tools used to detect and prevent criminal fraud. However, they also provide vital data needed to fight friendly fraud — especially Visa disputes. If you don’t include AVS and CVV response codes in your chargeback response package, you have a very low probability of winning 10.4 disputes.  

Some merchants balk at the idea of adding more friction to the checkout process. However, there are ways to request this information without negatively impacting conversions. For example, you can request AVS and CVV, but not decline transactions with mismatched data. 

Respond to friendly fraud and recover revenue

You can and should fight friendly fraud chargebacks. 

The recovered revenue will add a massive boost to your bottom line. But fighting chargebacks has additional benefits you might not be aware of. 

• Pay less in fees
• Avoid fines and penalties
• Improve your reputation with your payment processor

A lot of merchants try to fight chargebacks on their own and give up because they think there’s not enough ROI. But you’d be amazed by what is possible with the right strategy and technology. 

For example, at Kount, our clients have been able to reduce labor costs by 45%, improve win rates by 116%, and increase ROI by 914%.  

Use a pre-transaction fraud solution

One of the biggest challenges of chargeback management is differentiating between criminal fraud and friendly fraud. Data and technology can help improve the efficiency and accuracy of that task — and a pre-transaction fraud solution offers both. 

A fraud solution provides the evidence you need to expose friendly fraud — whether that’s through Order Insight or chargeback responses. And the technology can help block known fraudsters from attacking your business again in the future. 

Reach out to Kount if you’d like to learn more. 

Here are our top suggestions on how to make your chargeback management strategy more efficient, effective, and transparent. 

Combine solutions when possible

Look for ways to break down silos and consolidate your data. 

Can one platform replace the functionality of another? Or could you switch to one new platform to eliminate two old platforms? 

This suggestion might seem like a daunting, expensive task. But the long-term cost savings and efficiency will be well worth the short-term effort.  

Increase automation

Automating repetitive, error-prone tasks has many obvious productivity benefits. 

For example, 67% of surveyed knowledge workers report that automation makes them more productive. And 58% admit that automation helps them save time on projects. 

But automation also offers quality of life enhancements too.

Two out of three employees say they are satisfied with their role because of automation. Sixty five percent of survey respondents say automation at work makes them less stressed. 

And 52% of surveyed workers said they would rather sit in traffic for two extra hours every day than give up the automation tools that make their lives easier. 

When applied to chargeback management, automation has the same notable benefits. For example, automation can reduce the time spent fighting chargebacks by 84%. 

Collaborate with industry members

Don’t let chargeback management become an isolated task. It’s easy to feel overwhelmed, confused, and frustrated, but you don’t have to face those struggles alone.

Look for opportunities to collaborate with other professionals. Bounce ideas and suggestions off each other. Learn from other people’s mistakes. 

But be selective of who you talk to. There are lots of individuals out there willing to give their advice on all sorts of things. Make sure you are consulting with an actual professional. 

Here are some people and places to consider. 

• Your payment processor: Your processor acts as a gatekeeper at various stages throughout the chargeback process. There are certain preferences and expectations — like how to order and format a chargeback response — that you’ll want to know. And processors have a close working relationship with acquirers who connect directly with the card brands. If you reach out to your processor with questions or requests, you’ll likely get insider information you wouldn’t find anywhere else. 
• Your solution provider: If you work with a third-party solution provider for chargeback management, you should have access to an account manager or customer support team. Reach out and see if you can get advice on how to improve the accuracy and efficiency of your strategy. Some providers might charge for consulting sessions. But the team should be willing to provide basic advice as part of your contract. If not, it might be time to look for a new provider! 
• Online forums: There are various ways to virtually connect with industry professionals. For example, MRC manages a Slack channel. Kount offers an online community for clients. Midigator created an Ask the Chargeback Expert group on LinkedIn. Look for opportunities to get connected. 
• The card brands: When possible, go directly to the source. The card brands will have the most accurate information on regulations and updates. Dig into their published guides, look for representatives at trade shows, and read thought leadership content — like this white paper! 

If you ever have questions about chargebacks, you are always welcome to reach out to the teams at Kount and Verifi. We’re happy to help!