In most cases, when a cardholder files a chargeback, merchant doesn’t hear about it until it’s too late. By using alert networks, merchants get notified of cardholders actions in real time and have a chance to resolve a dispute before they become chargebacks.
One of the companies that give merchants a chance to fight chargeback issues on an equal footing is Ethoca. Using an elaborate fraud alert network, Ethoca intercepts chargebacks in the merchant’s favor.
Common effects of chargebacks
Chargebacks present merchants with several undesirable consequences. Here are some of the leading threats that chargebacks pose merchants:
- The merchant pays fees for every chargeback. This results in lost revenue.
- If chargebacks exceed 1% of sales in any given month, merchants face even bigger fines.
- If chargeback rates continue to exceed the acceptable threshold, the merchant’s account could be terminated.
- Responding effectively to chargebacks diverts resources from the merchant’s core business.
Ethoca alerts you to take action
Based in Toronto and founded in 2005, Ethoca is the global leader of the technology which enables online businesses, card issuers, and eCommerce merchants to recover lost revenue, increase transaction acceptance, stop fraud, and eliminate chargebacks from both fraud and customer service disputes.
With an elaborate fraud alert network, Ethoca closes the information gap between card issuers and the merchants. These alerts give merchants advanced notice of transaction disputes, making it possible for them to take action in real-time. Using alert networks like Ethocas’s, merchants can expect significant revenue growth and cost-saving opportunities.
Benefits of prevention alerts
By notifying the merchants about cardholders filing disputes in real-time, Ethoca gives them a chance to resolve the issue directly, before it becomes a chargeback by the issuing bank.
From there, merchants have two options in this case:
- Refund the dispute: the revenue is still lost but without chargeback fees or increased sales-to-chargeback ratios
- Let the alert go to chargeback and fight it through representment to recover the revenue at stake.
Timeline of chargeback alerts
Time in which chargeback alerts get to the merchant depends on the merchant’s transactions volume and their history with the alert network. Merchants are alerted in the following time frames:
- Immediately (if the merchant is enrolled in prevention alerts)
- 20-30 days (if the merchant hasn’t registered on an alert network before)
- 45-60 days (if the merchant has no prior transactions, brand new merchants)
Rate of success in fraud alert network
- The number of prevented chargebacks depends on the following factors:
- Transaction volume (more transactions equals more alerts)
- The issuing bank (not all banks are covered by Ethoca alerts).
- Years in operation (established merchants more data and thus better coverage)
Data analysis shows the percentages of certain chargebacks that Ethoca fraud alert network can prevent. Ethoca success rate in intercepting and halting the chargebacks, based on service and/or product:
- 14% for the subscription industry
- 17% for physical goods
- 30% for digital services
- 33% for digital goods.
Is Ethoca the only alert network there is?
No! Another popular alert network is Verifi, based in Los Angeles. Together, both networks cover most issuing banks. There are some gaps and overlaps between the two. This depends on the relationships the two network negotiate and is always in flux.
However, geography provides a good rule of thumb to understand coverage between the two. Ethoca covers Canada, Europe, and Asia, while Verifi covers most of the US. Both charge a fee per alert and provide a 24-hour time frame to a merchant to act (to either contact the customer, issue a refund, or fight the chargeback). If the merchant doesn’t react within the time frame, he or she must pay the fee.
Benefits of chargeback management companies
If merchants choose to deal directly with Ethoca, the burden of resolving the alerts falls solely on the merchant. They also have to maintain the connection to the network. As a chargeback management company, ChargebackHelp offers some clear advantages to dealing direct:
- We can reduce the overlap between alert networks.
- We provide additional network coverage to avoid gaps.
- More bang for your buck. Alert fees cover more than one network
How to get started with prevention alert networks?
To get your accounts successfully enrolled in the prevention alert network, you must provide:
- Business/Merchant name
- Registered business address
- Merchant account descriptors
- Merchant’s account number
- Access to the merchant’s sales system (for alert resolution and refunds)
Are alert networks the best solution against chargebacks?
Alert networks like Ethoca provide merchants with a great solution to manage disputes and lower their chargeback rates; however, it does not address the root cause of chargebacks.
There are a few simple steps to reduce chances for chargebacks organically:
- Provide an exact description of the products and services
- Provide easy to reach customer service
- Quickly respond to customer contacts
- Provide clear and comprehensive terms of service before transactions are made
- Timely address internal issues such as fulfillment, descriptors or quality assurance gaps that may trigger chargebacks
For any further questions about how to leverage alert networks like Ethoca to manage chargebacks, come to ChargebackHelp. Drop us a chat down on the right, shoot us an email, or go old-school and call us 1.800.975.9905.
(featured image source: https://www.ethoca.com/ )