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Reality of Chargeback guarantees and fraud prevention

Chargeback (1)

Guarantees are the most sought-after feature people look for in sales, and when a Chargeback guaranty is given upon a merchant account that’s more of what the merchant has asked for, but how it is showcased may be a facade.

Besides, it can cost you more than a chargeback altogether. 100% chargebacks can never be prevented in a high-risk business. It is not like a chargeback alert service but more like a reimbursement to you when a chargeback like an insurance policy hits you.

Issuing chargeback guarantees breaks the bond in between partnership from merchant to the customer, merchants want to maximize accepted transactions and minimize the chargebacks. The chargeback ratio for a high-risk business is different and cannot be given a 100% risk-free environment to a merchant.

Financial Occurrence:  The chargebacks, which are reimbursed by the chargeback solutions providers, can be classified in three cases:

  1. The chargeback reimbursed is greater than the fees charged.
  2. The chargeback reimbursed is equal to the fees.
  3. The fee is higher than the chargeback reimbursed.

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Instance 1 or 2: Unsustainable situation for a merchant and a merchant should be aware if their fees are increasing at some point.

Instance 3: In this case its more than clear that a fraud prevention company is keeping refusal rates at maximum levels, which is costing the merchant more and increasing their revenue directly.

There are some good points to it as well because a merchant does not have to maintain a dedicated chargeback or fraud prevention team it is beneficial for small e-commerce merchants, retail merchants, startups and merchants, processing for high margin goods.

One of the biggest flaws in the chargeback guarantee model results in a conflict of interest. If your fraud prevention vendor spends on refunding many chargebacks, they have every odd in their favor to decrease their frequency – even by risking more false positives.

Chargeback Expertz provides services like chargeback alerts which act as a notification prior to a Chargeback. To know more, call us anytime at the toll-free number i.e. +1 855-465-4723 or visit chargebackexpertz.com for the same.

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