Scaling Your Chargeback Dispute Process
Do you remember your first time disputing a chargeback? I do. It was complicated, puzzling, and all-around messy. As a newly minted Fraud Analyst at a fast-growing payments company, I felt like Alice falling down the rabbit hole and landing in a crazy world I didn’t (yet) understand.
The chargeback fighting process was (and is) outdated and opaque – as tulgey and frumious as any foe you could stumble across in Alice’s Wonderland. Stakes were a little higher for our company, too. As a payment gateway, we processed payments for a wide variety of customers, ensuring they got their money. But we also were the bearers of bad news if our merchants got a chargeback, and it was our responsibility to dispute any chargebacks we or our customers thought were invalid.
Sound familiar? Many startups suddenly find themselves facing down a growing tide of chargebacks, unsure how to begin tackling the problem. But I learned a lot from working on the front lines, and hope that some of those lessons can help you too.
Study up so you can act effectively
When we first started dealing with chargebacks, we could handle them in a pretty ad hoc manner. There weren’t that many of them, nor were we hearing lots of complaints from our customers. As volume grew, though, everything began getting curiouser and curiouser… and we knew we needed a sound, repeatable process to get ahead of the problem and tame the chargebacks beast.
To develop that process, we needed to expand our knowledge beyond the basics and the tribal knowledge that was floating around. For one thing, we dug up lengthy manuals on chargebacks that outlined the processes, reason codes, and the best evidence for different reason codes. These manuals are very dense, but they do have a lot of information that helped us approach chargebacks more effectively. And don’t underestimate the power of some quick Google-fu! We found plenty of one-off articles and sites that offered tips and tricks as well.
One of the most valuable things we learned was the various reason codes for chargebacks, and what particular evidence was required for each. Knowing this, we could go to our customers, ask for very specific information, and also educate them on best practices to defend themselves. A chargeback for “item not received,” you say? Send us your shipping receipt or tracking number to demonstrate you sent the item to the payer.
It felt good to be helping our customers solve problems. Equipped with new knowledge, we had a better idea of how we could standardize a process as well as educate and protect our merchants.
Automate where you can
It might not seem like much, but automating chargeback entry made a huge difference to our day-to-day efficiency – and to our job satisfaction. As the business grew, the number of payments to review and chargebacks to fight grew too. Manual entry wouldn’t scale, and we had a ton of other fraud issues that needed our attention. Lo and behold, an engineer on the team came up with a solution that programmatically entered chargebacks whenever we received an electronic notification. No more faxes or grunt work for us!
Once this part was taken off our plate, records were not only more accurate but we as a team had more time to focus on higher leverage tasks. My only regret is that we didn’t automate this even sooner.
Standardize Your Process
The first semblance of our chargeback process involved a lot of back-and-forth emails with our customers which, like manual entry, wasn’t scalable and hit lots of snags. We would ask “Can you provide a tracking number?”, someone would respond with “yes”, then we’d have to follow up again with “Can you send it to us…?” The chains could go on forever – both in actual length and in how long it took to reach a conclusion.
We even briefly experimented with emailing a PDF form to collect information and look more “professional” than back-and-forth emails. More often than not, though, customers had difficulty filling out the form or didn’t fill it out completely, which led to the long-running conversations we were trying to avoid in the first place.
Recognizing the need to formalize this process a bit more, we worked with our engineers to build out a “Dispute Center.” This gave our customers a concrete place they could go to submit evidence for chargebacks and to see the status of the dispute. We also outlined some basic guidelines to help them submit the best information possible upfront.
The Dispute Center had an added benefit for us, too. Instead of us needing to copy and paste and bunch of random things we were emailed into a word doc, our engineers built us a nifty PDF generator. Now, with the click of a button, we could generate a single document that had a cover letter and all the evidence we needed to send to our bank.
Creating the dispute center was a win-win: customers had an easier time providing their information, and we were able to receive and send higher quality information much faster than before.
Catching fraud ahead of time
However, no matter how many positive changes we made to our dispute process, there was no disputing (ha!) one unfortunately truth: chargebacks are notoriously hard to win. Even with the best guidelines in place and all the best evidence in hand, you may not win. Businesses of all sizes often devote significant time and resources to disputing chargebacks, only to….not win.
The best-case scenario? Get a great tool in place that prevents chargebacks in the first place. Now that I work at Sift Science, that’s one of my job responsibilities: helping our customers get the most out of our machine learning-based fraud detection solution, so they can avoid chargebacks and spend as little time as possible in the crazy world of disputes. Like Wonderland, it’s a place you may visit occasionally, but you wouldn’t want to live there.
