As a merchant, you probably already know this. But… chargebacks? They’re a pain in the A$$!
To make things worse, the whole chargeback process is fraught with all sorts of hoops that you, as the merchant, will have to hop through in order to contest and (maybe) win back your hard-earned profits (which, according toVerifi, you have a 40% chance of doing successfully — with the ‘true win’ rate averaging at 22%).
But okay, enough with the numbers. I’m sure you understand the severity of the situation quite well already. We can move forward with answering the BIG question for the day, which is:
What are you going to do about it? Well…
Payment Expert Jed Morley, founder and CEO ofPlatinum Payment Systems, a payment processing company that has over twelve years of experience working with merchants from all walks of life (including high-risk and high-volume merchants), recently published an educational video on hisLinkedIn Account that goes over this exact subject, offering tips on how to navigate through the steep learning curve and make it out on top of the chargeback process:
1. Chargebacks Still Occur When Playing by the Rules
The first words of wisdom that Jed Morley had to offer were these:
“Knowing how to manage chargebacks is IMPORTANT for all ENTREPRENEURS, not just for high-risk players.”
It’s simple enough, but a lot of beginner entrepreneurs make the mistake of thinking that chargebacks are only for the ‘bad’ guys, when the opposite is true.
“You can be the best merchant, with the best systems, and still get chargebacks because of friendly fraud,” Jed states in his video. “They happen all the time. Your customer might not have recognized the charge on their account based on the description you gave. They might not have a way of getting hold of you. Or, even, their spouse or their partner saw the charge but didn’t understand what it was. It happens to everyone.”
Simply put, just because you’re playing by the “rules” doesn’t mean that you’re in the clear.
As Jed Morley stated, most chargebacks (around 86% of them, in fact), are probable cases of friendly fraud. And this rate, according to recent reports, is increasing at a rate of 41% every two years. With most merchants losing out on an average of 1.47% of their total revenue as a result of innocuous (and easily fixable!) things like not having a readily identifiable way for customers to reach your business.
2. Visa and MasterCard Have Thresholds to Monitor Chargebacks Volume/Ratio
Another common misconception that merchants have is that they think that they have to go through it all alone. That, just because the banks are on the customer’s side of things, they have no one to turn to should they need the help.
Jed Morley corrects this in his educational video, saying: “In the last 12 years, I have worked with over 10,000 companies — creating transparency in the payment’s space. A business is useless without a payment ‘PARTNER’.”
What he means by this is that there is a lot to understand about payment processing that is impossible without someone on your side. Key amongst which involves the second tip on his video which is to understand the thresholds that card issuers like Visa and Mastercard use to monitor the chargeback volume/ratio of a merchant.
Chargeback thresholds are calculated in two ways:
- The total number of chargebacks your business receives per month.
- Your business’s ratio of chargebacks to transactions per month
All the different card networks have different thresholds established, and there may be more differences still based on your business region or your merchant category codes.
Of course, that’s not where the complications stop. But let’s put it this way, if you aren’t properly acquainted with these thresholds, and fall under the category of excessive chargebacks as a result, that’s pretty much bankruptcy. That’s being placed under the TMF/Match list and being incapable of getting a merchant account anywhere for the next five years.
Now, understanding all this requires a lot of patience and know-how in the payment space — which is almost impossible without someone on your side to help things along. And that’s why payment processors like Platinum Payment Systems are so proud of their close connections with their clients and their long history of experience in the industry.
If you want to learn how to manage your chargebacks? You need a partner on your side that will offer up extra protection and guide you through the process so that you can focus on more important aspects of your business.
3. TMF/Match List Can Affect Acquiring Future Payment Accounts
Lack of preparation is the next thing that Jed Morley addresses, saying: “Entrepreneurs can have their business crippled OVERNIGHT if not prepared. Frozen funds and shut-down accounts are a common occurrence.”
As mentioned above, without properly understanding and navigating through chargeback risks, you can get yourself into the Terminated Match File (TMF) or MATCH list — which pretty much spells the end of your business. Thankfully, if you get at it early enough, you can work with your acquirer and processor to start working on your dispute activity before you end up stuck under the TMF or MATCH list for five years.
Now, if you want extra support on this matter, Jed Morley ends the video by inviting any inquiries to be sent over to the Platinum Payment Systems (PlatPay) hotlines, where the PlatPay support team is always ready to help you with your payment processing problems.