Chargebacks are a headache for businesses, costing them revenue and incurring hefty fees. Whether due to fraud, billing errors, or "friendly fraud," these disputes can quickly add up. Too many chargebacks can even lead to losing your merchant account. In this guide, we’ll break down what chargebacks are, their impact, and how chargeback prevention alerts can help you avoid them.

We'll explore what chargebacks are, how they affect your business, and how chargeback prevention alerts can help mitigate the risks.

What Are Chargebacks?

At their core, chargebacks are a form of consumer protection. When a cardholder identifies a charge they believe to be fraudulent or incorrect, they have the option to dispute it with their issuing bank. The bank will then initiate an investigation, and if the claim is deemed valid, the bank will reverse the payment, charging the amount back to the merchant.

This reversal can be triggered by several reasons, including:

• Unauthorized transactions
• Fraudulent charges
• Non-receipt of goods or services
• Dissatisfaction with the product or service received

Once a chargeback is filed, the merchant has two options: accept the chargeback or contest it by providing evidence that supports the validity of the transaction. However, this process can be time-consuming and costly, particularly for businesses with high transaction volumes.

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The Financial Impact of Chargebacks

The financial impact of chargebacks goes beyond the disputed amount. For each chargeback, merchants incur fees that range from $20 to $100. If chargeback ratios get too high, merchants risk additional penalties such as higher processing fees or enrollment in chargeback monitoring programs like Visa's VDMP.

Excessive chargebacks can also lead to long-term damage, including the closure of your merchant account or being placed on the Terminated Merchant File (TMF), making it difficult to secure new payment processing services.

Moreover, chargebacks can harm a business’s reputation with financial institutions and create friction with loyal customers if not handled properly.

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Chargeback Alerts: A First Line of Defense

Chargeback prevention alerts are a powerful tool for merchants to manage disputes before they escalate. Services like Ethoca and Verifi, integrated with Disputifier, provide real-time notifications whenever a dispute is filed, giving you a window of opportunity to address the issue before it becomes a chargeback.

Here’s how chargeback alerts work:

• Notification: When a customer disputes a transaction, the issuing bank notifies the chargeback alert provider (e.g., Ethoca or Verifi), which then alerts the merchant.
• Response Window: The merchant has 24-72 hours to either issue a refund or provide evidence to resolve the dispute.
• Prevention: By taking quick action, the merchant can prevent the chargeback from being filed, reducing financial losses and preserving their chargeback ratio.

Types of Chargeback Prevention Alerts

There are two major chargeback alert services merchants should know about:

Verifi Alerts (Visa)

Verifi, owned by Visa, offers two programs designed to help merchants manage chargebacks:

• CDRN (Cardholder Dispute Resolution Network): Merchants are notified of disputes directly from issuing banks and can choose to either refund the transaction or let the chargeback proceed.
• RDR (Rapid Dispute Resolution): RDR automates the process by applying pre-defined rules set by the merchant. If a dispute meets the criteria, an automatic refund is issued, preventing the chargeback without merchant intervention.

Ethoca Alerts (Mastercard)

Ethoca, owned by Mastercard, operates similarly by notifying merchants of potential disputes before they turn into chargebacks. Merchants can issue refunds or take other actions to resolve the dispute early.

Both Verifi and Ethoca are highly effective, and businesses using both have reported up to an 80% reduction in chargebacks.

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How Chargeback Alerts Help Protect Your Business

Chargeback alerts provide several benefits for merchants looking to reduce disputes and protect their business from financial loss:

• Immediate Action to Prevent Losses: Chargeback alerts notify you as soon as a dispute arises, giving you the chance to issue a refund or address the issue before it escalates.
• Improved Customer Relationships: By resolving disputes early, merchants can reach out to customers and resolve their concerns, potentially converting a negative experience into a positive one.
• Maintaining Good Standing with Financial Institutions: Reducing chargebacks helps keep your chargeback ratio low, preventing penalties, increased fees, or account termination.

How Disputifier Helps Businesses Prevent Chargebacks

At Disputifier, we offer a comprehensive chargeback prevention and management system that integrates Ethoca and Verifi alerts, helping businesses stop chargebacks before they happen. Here’s how our solution can help:

Automated Chargeback Responses

Disputifier automates chargeback responses with customized, data-driven responses that are proven to increase win rates. We handle the entire process, from sourcing evidence to submitting the response, ensuring you have the best chance of recovering disputed revenue.

Chargeback Alerts

With our chargeback alert system, you can block up to 95% of chargebacks automatically. We issue refunds instantly to stop chargebacks in their tracks, protecting your revenue and preventing the negative impact on your merchant account.

Fraud Prevention & Detection

Our platform includes advanced fraud detection tools that identify and block fraudulent transactions before they lead to chargebacks. With automated cancellations and reduced false positives, you can protect your business without disrupting legitimate sales.

"Order Not Received" Prevention

Long shipping times are a common cause of chargebacks. Disputifier helps prevent these chargebacks by sending proactive alerts and updates to customers, keeping them informed and reducing the likelihood of disputes.

Conclusion

Chargeback alerts, when integrated with a robust chargeback prevention system like Disputifier, can drastically reduce the number of disputes that turn into costly chargebacks. By taking proactive steps to address disputes early, you can safeguard your business, protect your revenue, and maintain strong relationships with both customers and financial institutions.

Ready to experience the benefits of chargeback alerts? Try Disputifier today and start preventing chargebacks before they happen.