Having an efficient chargeback management strategy is critical for detecting and preventing risk. Everything from the team you build to the workflows you adopt can have a significant impact — good or bad — on your bottom line.
STEP 1
Build a chargeback management team
Building an in-house chargeback team sets the foundation for your chargeback management strategy.
NOTE
Having a dedicated chargeback management team would be a luxury for many businesses. A lot of merchants have just one or two people managing chargebacks — and chargebacks make up just a small portion of their many responsibilities!
We recognize that hiring people specifically for the task of managing chargebacks might not be feasible for you right now. But when you are ready to build out a team, we want you to be prepared.
Look for employees who are committed to driving efficiency. Consider the following skills and characteristics as you build and maintain your team.
- Reliable – Chargeback management timelines can be rigid. You need reliable, productive team members who will be there when you need them.
- Flexible – To get consistently positive results, you need to regularly update your chargeback management techniques to keep pace with emerging threats. The employees you hire need to be willing to adjust workflows as your strategy evolves.
- Self-Motivated – Chargeback activity ebbs and flows, and an employee’s workload may fluctuate from day to day. When activity slows, team members should be able to keep busy with new projects or finding new ways to optimize day-to-day operations.
- Assertive – Chargeback management isn’t a solo act — it requires heavy collaboration from multiple team members across various departments. Look for employees who value teamwork and will frequently offer suggestions or speak up when an issue is discovered.
- Data-driven – Data analysis is an important part of chargeback management. Team members should have a knack for digging into the data, researching trends, identifying potential issues, and monitoring results.
- Meticulous – Managing chargebacks requires accuracy and attention to detail. If a single step is missed or not completed on time, your results will suffer. Employees need to follow instructions and focus on the details — no matter how insignificant they may seem.
NOTE
Your team is not limited to the employees who are actively managing chargebacks. Consider other team members who may be tangentially related to payment disputes — such as customer support and order fulfillment — as extensions to your primary team. Working closely with other departments can help minimize the risk of disputes.
STEP 2
Outline your chargeback management strategy
To manage chargebacks, you need a strategy. And not just any strategy — a strategy that is compliant with industry rules, standardized for your entire team, and regularly updated as needs change.
As you establish your chargeback management strategy, here are some things to keep in mind.
Review industry regulations
There are a variety of rules you have to follow in order to process payments. These rules help ensure secure transactions and keep risk in check.
The card brands (Mastercard, Visa, etc.) have set rules that are usually updated twice a year — around April and October. All rules — and their updates — can be found online. If you are unable to find the rules handbook on the card brand’s website, your acquirer or processor can provide a copy.
Be sure to read through all the rules applicable to your business. There are different regulations depending on your business type and region. For example, the card brand rules for an online merchant may be different from those for a brick-and-mortar operation.
You should also make sure you understand your processor or acquirer’s expectations, which might differ from card brand rules.
For example, card brands have set thresholds for chargeback ratios, fraud ratios, and VAMP ratios. But your processor or acquirer might have different thresholds you need to be aware of.
If you are fighting chargebacks, you’ll want to ask about formatting expectations. Processors and acquirers usually have strict requirements for chargeback responses. And if a response doesn’t adhere to those guidelines, it won’t be accepted. These rules are typically not shared publicly, so you’ll have to ask your processor what the specific guiding principles are.
Create standardised policies and educational programs
Your management strategy will work best if everyone on the team is equally educated and uses the same terminology.
Create training and ongoing education programs. Outline the information new employees need and determine when established team members will need training refreshers. We recommend you utilize a trusted industry resource, like the AltoPay blog. You could also schedule training sessions with our team of experts. Let us know if you are interested in this option!
In this education, include the standard terminology your team should use. For example, will you use the term ‘chargeback’ or ‘dispute’? And be sure to address acronyms, which are commonly used in the payments industry. Consult a payments glossary — like the one AltoPay provides — so your team is all on the same page.
Define what success looks like
To determine how successful your strategy is, you need to have key performance indicators (KPIs). Here are a couple metrics we recommend you track.
- Chargeback Ratio – Mastercard, American Express, and Discover carefully monitor your chargeback-to-transaction ratio. This ratio compares the number of chargebacks you receive in a given month to the number of transactions processed in the same month. Breaching established thresholds could mean fees and penalties — such as enrollment in monitoring programs.
- VAMP Ratio – Visa also measures and monitors risk, but in a slightly different way than the other card brands. Your VAMP ratio calculates how many monthly transactions yield a fraud report (TC40) and/or chargeback (TC15).
- Return On Investment (ROI) – ROI is a valuable metric to monitor. It compares how much value you receive to your financial investment. The ROI of fighting chargebacks is a pretty straightforward calculation — you simply compare the amount it costs to fight the chargeback to what you are able to recover. The ROI of preventing chargebacks is a little more difficult to calculate though. Basically, you need to make sure you are recouping the costs associated with your prevention solutions — which could come from eliminating chargeback fees, avoiding monitoring program fees, reducing processing rates, and maintaining your merchant account.
Figure out which chargeback prevention tools you should use
There are a variety of chargeback prevention solutions on the market today, all of which are provided by our AltoShield product:
All solutions are effective, but all might not be a good fit for your business.
We encourage you to check out our detailed guides on each of the available solutions to review the pros and cons. Then, schedule a call with our team to talk through which solutions would best fit your business’s strategy.
Build a process for analyzing data
Proper data analysis can be a game changer for your business. Each chargeback you receive contains a wealth of information. And if you analyze that data closely, you can gain valuable insights.
Data allows you to determine why chargebacks are happening so you can solve problems at the source. It can also help you determine which portions of your strategy are and aren’t working so you can pivot to improve ROI.
We have a detailed guide with step-by-step instructions on how to analyse your chargeback data. We encourage you to check it out.
PRO TIP
Chargeback management software — like AltoShield — can help ensure your data is accurate and easy to analyze.
Assign roles and responsibilities
To ensure your chargeback management workflow runs smoothly, make sure each of your team members understand their responsibilities. Some employees might specialize in certain tasks, others might be dedicated to certain steps in the chargeback management workflow.
Will some employees focus on managing chargeback solutions while others engage in customer service? Will you have a dedicated data analyst? Whatever you decide, make sure team members are cross-trained so they can fill in for each other when needed.
STEP 3
Execute and optimise your chargeback operations
The biggest contributing factor to your team’s efficiency is how well you execute your strategy. The more you can streamline your chargeback management process and automate certain tasks, the better your results will be. Here are some tips for optimizing your strategy.
Your risk management data is probably segmented across various platforms — your merchant account portal, your chargeback management portal, your CRM, your gateway, etc. Make sure you can access all the applicable platforms and can find the data you need.
Unlike technology, humans need to rest. They can’t work 24 hours a day, seven days a week. And sometimes, humans make mistakes — which can increase chargeback costs. AltoShield, our chargeback management product, offers customizable automation and streamlined workflows that help chargeback management teams operate with greater efficiency.
If you fight chargebacks, you’ll want to build templates for your response packages. With templates, you can increase efficiency.
- Decrease labor hours
- Reduce errors
- Standardize processes for team members
- Monitor which templates have the best win rates
- Adhere to tight submission deadlines
STEP 4
Monitor your results
Once your chargeback management workflow is in place, review your outcomes regularly. Even if you build the perfect team and develop a strong strategy, there is always room for improvement. Evaluate outcomes on multiple levels to unlock better results.
- Revaluate your KPIs. Determine if your goals are realistic and attainable. Are you measuring the right metrics? Are your calculations accurate?
- Evaluate strategy outcomes. Check your success rates. Are you achieving your goals? Are chargeback ratios decreasing or increasing? Are you able to avoid monitoring programs? Are your efforts having a positive impact on the business’s bottom line?
- Evaluate individual outcomes. Look at the strengths of each employee and their potential areas of weakness. Who is the most productive? Can your top performers share techniques or strategies to improve the effectiveness of other team members?
- Audit related departments. Review the teams that could potentially impact chargeback management — such as customer service and fulfillment. How can you work together and collaborate to enhance the customer experience?
Build an effective chargeback management strategy with AltoPay
Do you want the most efficient chargeback strategy possible with the best results available?
AltoPay can help.
Our goal is to simplify the chargeback management process so you can increase revenue without increasing costs.
AUTHOR
Jessica Velasco
For more than a decade, Jessica Velasco has been a thought leader in the payments industry. She aims to provide readers with valuable, easy-to-understand resources.
