Chargeback Reversal: How to Regain Revenue

Sydney VaccaroChargeback BasicsLeave a Comment


When a merchant receives a dispute, they have two options: one is to accept the dispute, which means they will not respond and lose the transaction amount from the sale. The second is responding to the dispute with the goal of a chargeback reversal. In this post, we'll go through the process of a chargeback reversal and how a merchant can successfully regain their revenue.

What is a Chargeback or Dispute?

A dispute (also referred to as a chargeback) is a transaction reversal meant to serve as a form of consumer protection from fraudulent activity committed by both merchants and individuals. This means that if a merchant wrongs a customer (e.g. misleading product description, products never being received, not receiving a refund) or if the cardholder is a victim of a fraudster using their credit card credentials, it is a valid reason to dispute a charge.

The dispute process was put in place to protect cardholders from fraudulent behavior. Unfortunately, this process can be taken advantage of. Chargeback fraud is when a cardholder maliciously disputes a legitimate transaction. These fraudsters are using the chargeback process to get their money back while still retaining the goods or services received. Friendly fraud is when a cardholder accidentally disputes a valid charge without malicious intent. This fraud can be rooted in simple forgetfulness, an unclear merchant descriptor, or a family member making unknown purchases.

Friendly fraud and chargeback fraud disputes happen when a cardholder misuses the dispute process. Because of this, the card networks allow merchants to disprove the cardholder claims and regain the transaction amount by submitting a dispute response document.

How to Reverse a Chargeback?

The only way to win and reverse a chargeback is with a well-crafted dispute response. If a merchant successfully creates and proves that the dispute has no merit, the chargeback will be reversed.

But how does a merchant create a dispute response to successfully reverse a chargeback? Here are a few tips to make the best dispute response possible:

Reason Code Research

Proper reason code research is necessary to create an accurate and winning dispute response. Reason codes are alphanumeric strings of text provided in a dispute notification that explains the cause for the dispute. Each of the major card networks has its own categorization of reason codes. These codes offer understanding into why a specific chargeback occurred and, most importantly, detail what specific documentation needs to be provided to challenge the dispute. Responses are the most powerful when they contain the compelling evidence provided as directed by the specific card network rules and regulations. Every dispute is unique, which means that necessary compelling evidence can change based on the reason code, type of transaction, your industry, and other factors.

The major card networks update their rules and regulation up to twice a year, so it is also essential to stay up to date on any changes.

Creating the Response Document

In order to create a dispute response that will warrant a chargeback reversal, merchants must first use their reason code research to know the correct evidence for the dispute. Secondly, they need to be able to locate all the necessary evidence needed for the response. This is why having a well put together dispute response process is required to recover as much revenue as possible.

Merchants need to establish a knowledge base that can tell the dispute team what information goes in the response document. Merchant can use templates, spreadsheet workflows, homegrown systems, or dispute management software. The next step of the process is to find the best way to share all the necessary evidence with the dispute team. To create a response, your team may need access to your payment technology, ecommerce platform, customer service system, among others. The combination of correct evidence and the ability to quickly create a response will result in an increased win rate and lower cost in labor.

The final step of the response process is making sure the dispute response document is created and submitted inside the card network's allotted time frames.

Implementing Software to Make the Job Easier

Creating a dispute response can be a tedious process with logging into multiple data sources or constantly researching rules and regulations. When a merchant implements dispute response software, it makes the process efficient and less time-consuming. With this software, merchants can link data, automatically import information based on the reason code and transaction modifiers, and create an aggregated dispute response document in seconds.

The software links data from an initial transaction across all other business services to get a full, instant view of a dispute. Then the transaction data that is tied to a dispute will be pulled and aggregated all in one place. Not only is the data aggregated, but it's aggregated intelligently. Every dispute is unique, so the software automatically populates a detailed response for each case. It processes all of the compelling evidence from your account integrations and builds it into a single, perfectly formatted document.

Having an efficient dispute response process helps merchants respond to every dispute with the correct evidence to reverse chargebacks. To learn more about how to dispute management software can benefit your company and the possible ROI, you can schedule a demo with one of our dispute experts.