An effective dispute management process is essential for any type of merchant that wants to retain hard-earned revenue. There are two sides to dispute management that prevent revenue loss. The first is to stop disputes before they happen. The second is to efficiently respond when they do.
Preventing Disputes From Ever Happening
The first step to preventing revenue loss from disputes is to take preventative measures to stop disputes from ever happening. There are a couple of ways merchants can do this:
Front End Filters
Front end fraud filters can help merchants prevent true fraud disputes from occurring. True fraud is when a fraudster obtains credit card credentials and successfully uses them. The liability falls to the merchants because it is the merchant's responsibility to prevent fraudulent transactions from being accepted. By preventing true fraud disputes, merchants protect themselves from an unwinnable chargeback and revenue loss.
Fraud filters allow merchants to assess if a purchase is fraudulent or should be accepted. The filters can sort incoming transactions based on predetermined factors such as industry, customer behavior, and more.
The transaction doesn't have to be true fraud for a merchant to receive a dispute. Invalid disputes can happen because of malicious intent, buyer's remorse, or simple forgetfulness. While preventing invalid disputes can be difficult, merchants can help by making changes to their operations. For example, by having easy to reach and attentive customer service, a customer can reach out to your customer service to resolve an issue instead of their issuing bank. Other operational changes could include a reminder email before the subscription charge happens or promptly crediting the customer after a return.
Real-time Resolution (RTR) in the Chargeback App enrolls merchants in Visa Merchant Purchase Inquiry (VMPI)—allowing for real-time communication of customer, order, and product details between the merchant and issuing bank.
With Real-time Resolution, the dispute analyst can use transaction details to decide if the dispute is invalid and prevent it from being filed. In cases of friendly fraud, the additional data helps jog the cardholder's memory about the purchase. And in cases where the cardholder is trying to intentionally misuse their chargeback rights, the extra layer of confirmation acts as a critical deterrent from proceeding with the dispute.
Why Stopping Disputes is so Important
When merchants are able to prevent a dispute from happening, they are preventing the loss of revenue, a dispute fee, possible loss of product or services, and avoiding the costs associated with the response process (time and labor).
If true fraud disputes are not stopped, merchants cannot regain the transaction amount. For invalid disputes, merchants can recover the transaction amount by submitting a dispute response, but will still receive a dispute fee. By creating an effective front end fraud strategy, merchants can prevent true fraud and invalid disputes from happening—and, in turn, save time and money.
The second part of dispute management is responding to disputes when they do happen. The response process can be a tedious process of collecting information for different data sources and keeping track of card network rules and requirements. There are a couple of processes that merchants can put in place to make the response process easier.
Collecting All the Necessary Evidence
Each card network has specific reason codes that inform the merchant of why the cardholder is disputing the transaction. Each reason code has particular evidence that is required to disprove the customer's claim and for the merchant to regain revenue. Merchants need to first look at the required evidence and make sure it is being collected and can be easily accessed when the dispute response document needs to be created.
Staying up to Date on Rules and Regs
Card network rules and regulations usually get updated twice a year. This means your team needs a method of staying up to date on any changes to the required evidence, response process, or time limits. The most effective way to respond to disputes is to follow the card network rules precisely.
Dispute Management Software
Dispute management software makes the process of responding to disputes the most effective. The software allows merchants to integrate their payment platforms to pull the necessary data for the specific transaction in question. The software will automatically select the appropriate compelling evidence for any given dispute based on your industry, the reason code, and any specific modifiers that may be relevant. The logic behind crafting the appropriate response is already programmed. It also stays up to date on the latest changes to rules and regulations without your team having to lift a finger.
Why Having an Effective Response Process is so Important
Responding to disputes is necessary to regain revenue lost to invalid chargebacks. But having a well thought out and effective dispute management process is also vital. Creating a dispute response takes time and labor. The slower the process is for your dispute team, the less money you are actually recovering from a winning dispute response. For example, if it takes your employee two hours to create a dispute response, that is two hours of pay that is taken from the recovered revenue. By making the dispute response process as efficient as possible, it allows merchants to recover and keep revenue.