The Dangers of Outsourcing Dispute Management

Sydney VaccaroFraud PreventionLeave a Comment

The Dangers of Outsourcing

Outsourcing dispute management may sound tempting at times. It is one less thing that your company has to manage internally, but there are dangers that come with outsourcing disputes. It can put your company’s security, win rate, and bottom line at risk.

Security

After major data breaches hitting every kind of industry, data protection should be at the top of your company’s list. One of the warnings you have probably heard (maybe hundreds of times by now) is the risk of phishing scams. One of the data breaches that started it all was the Target 2013 data breach. This breach compromised 110 million credit and debit cards, and it cost Target $18.5 million. That is a horror story for merchants and it started with a phishing scam that was targeted at third-party vendors Target.

The goal of learning about data breaches is to make sure your company is fully prepared when it comes to your security. When you outsource data to a third-party vendor, you need to make sure you trust them with the information that they need in order to be effective.

When it comes creating a chargeback response is already a delicate process that involves sensitive information about the customer. This can include information like customer name, billing address, email address, and partial card numbers.  

To get access to all of that information the outsourced third party would have to be given access to ecommerce platform, CRM, ERP, fraud alert portals, shipping vendors and multiple payment service providers (gateways, processors, networks.)  That is a lot of information and account credentials that you are giving to to someone else’s employees that are not within your secure network.

Knowledge

Outsourced dispute analysts may have knowledge about the reason codes, the networks rules and its associated regulations. But they don’t know your company. So this is where your employees come in to fill the knowledge gap. Now, your employees may not have a perfect knowledge of the card network rules and reason codes off the top of their heads. But what they do have is knowledge about your company and (most importantly) your customers.

Your employees see the inner workings of your company every minute when they are at work. They know how your product is delivered, how your customer service interacts with customers, what sales channel do customers go through, and much more. This knowledge simply cannot be replicated by a third-party service. Your employees are the people that see and understand the compelling evidence that needs to be included in a chargeback response. And they are able to identify and find that evidence with ease.

Motives

Outsourcing your dispute management means that you are paying someone else to do the work for you. The pricing that these companies established is usually stem from one baseline. And that baseline is to charge you every time you receive a dispute.

In the simple rules of business, more profit is a good thing. So why would these companies want to help decrease your dispute rate? Every time you receive a dispute, they get paid a little bit more. There is not much incentive for them to decrease their margins. You can see the conflict of interest.

If you are handling disputes internally with your employees, they have no other loyalty but to your company. Afterall your employees receive a paycheck, benefits, and all the other great perks by working for you. So they will want to work towards making your company succeed since that means they also succeed.

Empowering Your Internal Team

In a recent podcast, Chargeback’s CMO Scott Stone comments on this topic. “The trick is digging into the rules and regulations. It is deeply complicated.” Scott continues, “So the main thing we are providing here is expertise. We are pouring through the documents. Visa just did a major overhaul in April. It was supposed to go out in October. We were ready in October, we are ready now, and we were ready when it went live in April.

The changes can be very difficult for a person who is in accounting or in finance at the organization. Where they are managing a lot of different things, to also know the rules and regulation. Then to manage a team of people that are doing the work and the manual labor of responding. And to know whether or not they are doing a good job, how to measure them, what is a good win rate, is this the right evidence, there’s a lot that goes into that. It is what leads a lot of companies to outsource this work.

But it mainly that boils down to expertise and understanding the rules and regulations. [Chargeback] can program that, we can stay on top of that, and facilitate that through software with guided workflows and an easy tool to use. But knowing your product, your customer service channels, and sales channels, how things were delivered, what expectations were set, that’s just something outsource can’t handle. The best of both worlds is when your internal team is the expert. That is when dispute management is really crushed and is really done well.”

By empowering your internal team you are putting your company in the best position to win disputes, lower your dispute rate, and protect your company’s revenue and data.