January 18, 2018
By Courtney Bode, Card Not Present® Contributor
The presents are unwrapped, the relatives have been shown the door and the leftovers are gone. The holidays are over. And, for online retailers, they were merry. But, while the frenetic pace of the Thanksgiving-through-New Year’s period has settled, the post-holiday timeframe presents its own challenges for fraud departments: chargebacks.
For the next three months, chargebacks will be your primary pain point and that pain will manifest itself in two main ways:
A higher chargeback rate – The chargebacks are from increased sales during the holidays. You will actually receive them during the lower post-holiday months, however, inflating your chargeback rate, potentially by 30 to 50 percent.
More chargebacks to respond to than normal – If your chargeback response team hasn’t grown by January, chances are that you will experience some stress trying to answer all of the chargebacks in a timely manner. Because they pack a heavy hit to your bottom line, this can be a daunting task.
So let’s be clear: it is safe to assume that you, as a fraud fighter, will be very busy with holiday chargebacks from January to around March. During this time, it’s important to focus on team efficiency so that you can win back as much as possible. While the standard win rate is around 21 percent, following the tips below has helped my past projects attain an average win rate of 55 percent or higher.
Create a chargeback response process
Every chargeback falls into one of several major categories, with some payment providers using the following: general, fraudulent, product not received, duplicate, credit not processed, unrecognized, product unacceptable and/or subscription canceled.
It’s important to create a high-level process for each category. This process will include the steps a chargeback responder should follow, the data they should grab and the type of response they should build. Having a consistent, outlined process has multiple benefits, including reduced time spent per chargeback response and greater quality assurance.
A high-level process is meant to give structure to a chargeback response. What should an analyst do and when should they do it? How do they know when to respond versus when to accept? What are the basic guidelines or steps that must be completed for each response?
To build an efficient process, include a checklist of data and specify the relative importance of each data piece. Next, have template responses that outline the basics per each category. Those basics depend on what data you have available for each case.
Create a checklist of available data for each chargeback category
Create a master list, per category, of the data that exists for a chargeback response and specify where the analyst can find it. It’s important to create a process around when and how the data should be obtained. Required data should go first. This way, if it is missing, the analyst can accept the chargeback and move on to the next one.
The necessary data will change slightly based on the chargeback. But, here are some major data categories to consider:
- Order and payment details – This includes billing verification pass/fail, the addresses used, the product details, etc.
- Customer historical behavioral data – This includes historical activity. For example, devices used and IP addresses as well as a user’s time zone or geolocation. Anything that proves consistency.
- Customer communication – All instances of communication with the customer—email, phone call transcripts, or even social media. Another great thing to consider using is customer order reviews, either numerical or written.
- Shipping and delivery details – This includes timelines and anything presented to the customer through the order process (at time of purchase, once shipped, etc).
- Company policies – Company cancellation and refund policies, particularly for quality or delivery issues.
Having a checklist is a great first step, but you can optimize this further by creating downloadable files. With some engineering, you can create a downloadable file that includes almost all of the data listed above. (An added bonus is that a combined file of all historical data can help fight friendly fraud. One specific example is if a customer has recent chargebacks but also has historical orders with the same data that were not disputed. Showing consistent customer behavioral data across undisputed and disputed orders is strong evidence against a chargeback.)
If you are not at a place to automate this yet, try a more static approach. You can also manually compile the data. Even screenshots of data mentioned can be used as evidence. For example, some chargebacks will be filed because the customer had a difficult time canceling or returning an item. In these cases, it is important to submit relevant company policies and where they can be observed by the customer.
Know when to accept a chargeback
It is important that your team can quickly decide if they should accept a dispute. Accepting chargebacks you are unlikely to win can help reduce the Jan-March chargeback madness—especially if you are overwhelmed by the number of chargebacks you are receiving. There are three rules of thumb that can make this decision easier:
Accept if you are missing critical data – If you are missing critical data, such as proof that an order was delivered, it’s best to immediately accept the chargeback.
Accept if the value of the chargeback is less than the cost to respond – If the goods or service associated with a chargeback is low value, it might actually cost more in labor to respond than whatever is won back. Setting a cap for minimum price to respond can be useful.
Understand your win rate per card issuer – AMEX and Paypal are notoriously tough on merchants. Review your past chargebacks and see if you have a tendency to lose these. If you lose the vast majority and you are overwhelmed by chargebacks, it might be better to just accept these and move on until things calm down.
Create chargeback templates!
Equally important as the data provided is the manner in which it is explained. Each chargeback type should have a basic skeleton based on what data you have available. This skeleton should state why this chargeback is unjust, present the data to prove it, and explain what the data means and how it should be interpreted. Create a master library.
While this sounds heavy, it saves a lot of time compared to a free-typed response for each and every chargeback. Not only does it save time, but it creates quality assurance. Templates enable you to be more confident that a response will cover all of the important pieces. This is especially important during hectic times when responses might not be consistently thoughtful and thorough. Chargeback responders can choose the template based on the data that is provided and then personalize it based on the unique customer case.
The holidays get a little crazy. A higher-than-normal quantity of chargebacks, created by elevated holiday sales, is to be expected as customers begin to assess their holiday haul. To combat this without sacrificing your win rate, focus on optimizing the chargeback workflow. With a strong process that highlights what data to include and a template to help craft a response, you can enable your team to move with swift confidence.
Courtney Bode is a business operations consultant with special experience as a fraud fighter. Her focus is integrating various departments to create a holistic company approach for building successful user experiences. Courtney enjoys spending time building international, cost-effective teams, particularly for superb marketplaces.