Select a Merchant Services Provider with Strong Chargeback Defense

Chargebacks are the bane of merchants, independent sales organizations (ISOs), and payment processors alike because they have the potential to cost everyone involved in payment processing a significant amount of money and headache. Chargeback defense programs are services offered by ISOs, processors, and third parties designed to catch and defeat chargebacks before they have the potential to become major problems, and gaining access to a good chargeback defense program should be a top priority for all merchants. 

What is a Chargeback?

A chargeback is a mechanism offered by the major card companies that provides consumers with a way to protect themselves against bad merchants. If a consumer buys something and the merchant fails to deliver on their end of the bargain and refuses to provide a refund, the consumer can go directly to the card company to dispute the charge by filing a chargeback. The card company will then investigate the matter, and if they agree with the consumer’s grievance, the charges will be reversed, leaving the merchant on the hook whether they like it or not. 

But chargebacks aren’t automatic. The merchant gets a chance to defend themselves by providing evidence to show they did, in fact, meet the terms of the sale, and the dispute isn’t warranted. If the evidence submitted by the merchant is convincing enough, the card companies will deny the chargeback.

Why Chargebacks are So Costly for Merchants

Chargebacks are a huge problem for merchants for a variety of reasons. The first and most obvious is that a chargeback costs the merchant money when the card companies claw back the sale revenue. In many cases, the merchant will also never be able to recover the merchandise sold, leaving them out both the revenue and the inventory.

But chargebacks aren’t only a pain for merchants. They also introduce risk for the merchant’s payment processor, the banks involved, and the card companies. Too many chargebacks and a merchant could quickly find that their relationship with the other players in the payment processing chain has soured, leading to higher fees or difficulty getting processing services at all. 

With such potentially significant consequences, it might seem like the obvious solution is for merchants to simply do business right and avoid chargebacks altogether. Unfortunately, that isn’t realistic because, regardless of how tight a merchant’s operations are, chargebacks are an unavoidable part of doing business. In many cases, the consumer feels wronged, even though they haven’t been. In other cases, chargebacks are outright fraudulent. But, in either case, even the most well-run businesses need a way to protect themselves against the cost of disputes, and that’s where chargeback defense programs come into play.

How Chargeback Defense Provides a Safety Net

The problem with disputing unwarranted chargebacks is twofold. First, some merchants don’t even realize it when chargebacks occur, because the traditional notification system is antiquated. Second, even when merchants know they need to file a dispute response, success requires very specific evidence to be presented in a very tight timeframe, and many merchants find the process confusing and difficult at best. 

Chargeback defense tools reduce the difficulty of responding to and winning disputes by making sure merchants know about them sooner, know what they need to file to win a case, and can get it in as quickly as possible to avoid missing strict deadlines. 

The best way to access chargeback defense tools is directly through a merchant services provider as either an add-on service or an included feature in a merchant account. Merchant providers get near-instantaneous notification of chargebacks – far faster than the notification merchants get, which often arrive in the mail. The fact that merchant providers have that advanced notice and a vested interest in seeing their merchants beat chargebacks makes them an ideal partner in the fight against unwarranted disputes. 

Selecting a Merchant Services Provider

When selecting a merchant services provider and evaluating their chargeback defense offerings, merchants should look at two primary areas: the feature set and the cost. A chargeback defense program that doesn’t offer adequate protection or features is useless, and one that makes a big impact on a merchant’s monthly bill may cost more than it’s worth in the long run. 

On the feature side, merchants should look for chargeback defense systems that offer immediate notification and a streamlined way for merchants to respond. For instance, the BAMS Dispute Assistant Manager system provides merchants and their ISOs with “day-zero” notification as soon as a dispute occurs. The system also provides automatic reminders on day one and day three if a response hasn’t been filed. From there, the system provides the user with a checklist of the exact evidence required for a response based on the chargeback’s reason code, and allows the merchant or ISO to file the response and all necessary paperwork digitally, without ever having to leave the Dispute Assistant Manager interface. Once a response has been filed, the system also provides full tracking of both ongoing and historical disputes. 

On the cost side, it’s important for merchants to analyze how any add-on features, including chargeback defense, impact their transaction fees. Fee bumps for add-on features are especially important for accounts operating on flat-rate fees, which are often already inflated, to begin with. With BAMS, merchants enjoy access to Dispute Assistant Manager as a built-in part of their merchant account, and their fees will always be the lowest in the industry – guaranteed – thanks to BAMS’s interchange-plus pricing model. 

To find out more about BAMS Dispute Assistant Manager, chargeback defense as a whole, or the savings a BAMS merchant account can offer on transaction fees, reach out to a member of the team for a quote today.