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In case you haven’t already noticed, chargeback abuse is on the rise. The use of physical credit cards is down as more consumers take to shopping online. E-commerce businesses face an increasing number of consumers who (willingly or not) misuse the chargeback system to obtain refunds. This misuse of the system presents a huge financial problem that is growing by the day, and business owners can no longer ignore it.

As a merchant, you can dispute, and many times win these friendly fraud chargebacks. However, the consumer has the advantage, and you, as the merchant, have the burden of proof as to why the chargeback request is invalid. Proving that a cardholder was not truthful requires evidence and preparation. It also means you must have a solid strategy in place if you want to avoid having excessive chargebacks eat away at your revenue.

There are a wide variety of reasons for chargebacks. When a chargeback is filed, the issuing bank assigns a reason code, representing why the cardholder is disputing the transaction. As such, there’s no “one-size-fits-all” approach to combatting all your chargebacks at the same time. A single reason code can also apply to many different situations. The variables can be overwhelming.

The good news? You can combat chargebacks with the right combination of tools, strategies, and experience. It may not be the best option to handle in-house, as you have a limited number of resources for running day-to-day business operations, let alone handling chargebacks. Instead, outsourcing them to a chargeback business could give you the unique solutions you need to address these individual problems.

If you’re not sure whether now is the right time to outsource to a chargeback business or not, here are some reasons you may consider it.

Improve Chargeback Recovery

From a bottom-line standpoint, the main goal of the disputation process is to recover revenue. And it can be challenging to accomplish if you aren’t up to date on the latest changes in the fluid digital payment landscape. Changes in e-commerce and other environments have caused card networks and payment processors to update their policies and evolve the way they organize and process disputed chargebacks. Fraud is uncommon in point-of-sale transactions (due to EMV payment technology); it’s more frequent in card-not-present environments.

All of this means that you need to be aware of changes if you want to improve your chances of recovering revenue. An outsourced chargeback business will be apprised of the latest policy changes and have the tools/software to address them. Professional development for this industry can be expensive if you keep chargeback management in-house, so if your recovery rate is low, outsourcing it is a smart business decision.

Identify Chargeback Root Causes

When you have a weed problem, you need to get at the root if you want to stop more from growing. You can’t address just the part that you can see; chargebacks are the same way. By understanding what caused the chargeback in the first place, you can prevent it from happening again. Chargeback problems are either your fault, the consumer’s fault, or due to true fraud. Suppose it’s your fault as the merchant. In that case, you can do things to identify the underlying causes of your chargebacks, such as inadequate marketing, unsatisfactory products, fulfillment or call center errors, inaccurate product descriptions, and so forth.

The key to efficiently identifying chargebacks underlying causes is automation. There are at least two dozen data points to consider when identifying these causes, and just as many reports, you can run to help create solutions. Manually completing this process is cumbersome; the right tools make it faster and easier. With the right outsourced chargeback business, you can enjoy both their expertise and software while focusing on other critical areas of your business.

Fight Chargebacks On-Time

Let’s say you know how to recover chargebacks and identify their causes. Can you do it in a timely fashion? One out of every three merchants is still relying on traditional mail to receive chargeback data, which means the deadline has usually passed to fight them by the time mail arrives. If this happens in a busy season (or there is a delay in the mail), the problem worsens. If you don’t respond to a chargeback before the deadline, you lose all dispute rights.

With an outsourced chargeback business, however, the team’s top-of-the-line chargeback tracking software will be integrated with your business tools, meaning you’ll know about chargebacks in real-time and can fight them promptly. Dispute the right ones early enough, and you’re more likely to get them recovered quickly.

Lower Chargeback Rates

Finally, the fourth reason it might be the right time to outsource to a chargeback business is when you’re approaching a chargeback threshold of 1%. As we’ve discussed before, your MID can be terminated, and your business can be placed on a blacklist—both of which have enormous ramifications when it comes to revenue and expenses. If you want to protect your profits, you need to address any chargeback problems before they spiral out of control. A chargeback business can help you do that.

Provided your business practices are within industry standard, and you monitor your refund rate, your chargeback rate is less likely to be in danger if you outsource its management to the right company. Thanks to proactive team members, automated tools, and powerful software, these chargeback businesses can notify you about pending chargeback issues and resolve disputes quickly. Furthermore, they can help you by identifying the underlying causes for them.

The Right Chargeback Business for You

All these considerations are essential when deciding how you want to handle chargebacks at your business. Cost is often the biggest obstacle for outsourcing. As you can see, there are other factors related to procedures, tools, timeliness, and expertise. Maybe your business can handle them effectively in-house. Perhaps it makes more sense to outsource them to a capable chargeback business. Whatever you decide, make sure you do your research.

Ultimately, you need reliable data, real-time updates, and ways to determine whether your chargeback management is working before it’s too late. You’ll be able to tell by looking at your chargeback rate (which should be going down) and your revenue (which should be going up). Can you determine whether you made the right decision or not with your existing setup?

MidMetrics is the trusted chargeback business you need to handle your outsourced chargeback management. We can give you the insights you need to reduce your number of chargebacks, grow your revenue, and get your merchant accounts back in order. Additionally, we offer in-depth analytics tools, a variety of integrations, an experienced team of chargeback experts, robust reporting systems, and easy-to-understand dashboards.

Want to see MidMetrics in action? Book a demo with one of our chargeback specialists today.

Chargeback management is an essential business function in today's payment environments. Whether managing chargebacks in-house or outsourcing to a chargeback management firm, our latest guide, Chargeback Management Essentials for Growth & Sustainability, will provide some fundamental essentials for business growth and sustainability.