Have you ever had that one friend who always borrows money but never pays you back? Yeah, that's essentially what chargebacks are. In this case, though, it’s your own customers, and the bank is taking their side.
One minute, you’ve made a sale. The next, the money disappears, along with extra fees. Too many chargebacks, and you’re looking at higher processing costs or even losing your ability to accept payments altogether.
That's what chargeback prevention tools are for. These tools help businesses stop disputes before they turn into a huge problem. But how exactly do they function? More importantly, why are these tools the preferred way of managing chargebacks? Let's answer these questions for you.
How Do Chargeback Prevention Tools Work?
Chargebacks happen for all kinds of reasons: fraud, customer disputes, unclear policies, or even simple misunderstandings. Each one requires a different solution, which is why chargeback prevention isn’t a one-size-fits-all approach.
The best way to reduce chargebacks is by using a mix of different tools, each targeting specific problems. Some stop fraud before it happens, while others help resolve disputes before they escalate. However, adding too many tools or using the wrong ones can backfire, making the process more complicated than it needs to be.
Every chargeback prevention tool falls into one of three categories:
Before the Transaction
Prevention tools scan transactions in real-time. They search for red flags such as mismatched billing details or high-risk locations. If something seems off, the system can decline the purchase or ask for extra verification.
For example, a fraud detection tool could stop a stolen credit card from being used, which can prevent a future chargeback.
After the Transaction
Even after a payment goes through, a dispute could still happen. Some tools send instant alerts when a customer files a chargeback, giving businesses a chance to resolve the issue before it escalates.
Source Detection
Chargeback prevention tools also help businesses figure out why disputes keep happening. If customers are confused by unclear refund policies or misleading product descriptions, fixing those issues can reduce future chargebacks. For example, adding a clearer return policy on a website might stop customers from going straight to their banks for refunds.
Benefits of Using Chargeback Prevention Tools
Even though managing your chargebacks manually is, in fact, possible, using chargeback prevention tools reign supreme over that method.
Here’s why they should be your main form of chargeback management:
- Keeps more of your revenue: Prevents fraudulent transactions and unnecessary disputes, reducing chargeback fees and protecting profits.
- Cuts operational costs: Saves money on fulfillment, shipping, and lost inventory by stopping chargebacks before they happen.
- Speeds up dispute resolution: Automates chargeback tracking and response, saving time and reducing manual effort.
- Provides real-time fraud detection: Uses advanced technology to flag suspicious transactions before they turn into costly disputes.
- Improves customer relationships: Addresses issues before they escalate, reducing frustration and increasing customer loyalty.
- Protects business reputation: Keeps chargeback ratios low to maintain trust with banks, payment processors, and customers.
Ethoca by Mastercard
Ethoca helps merchants prevent chargebacks by giving customers and banks more transaction details upfront. It’s all about clearing up confusion before it turns into a dispute.
Ethoca Consumer Clarity
Many chargebacks happen because customers don’t recognize a charge. Ethoca Consumer Clarity solves this by giving banks and cardholders detailed transaction data—like business names, logos, and receipts—directly in banking apps. This helps customers remember their purchases instead of disputing them.
Ethoca Alerts
Ethoca Alerts warn merchants before a chargeback is filed, giving them time to issue a refund or resolve the dispute first. This can be a huge money saver.
For example, a luxury fashion retailer used Ethoca Alerts to prevent 12,000 disputes and save $7.5 million in a year. Another case study talks about how a home improvement store saved $15.5 million by avoiding 16,000 chargebacks.
Fraud Insights
Ethoca also provides merchants with fraud data to spot trends and fix weak points in their checkout process. If the same chargeback keeps happening over and over again, merchants can take advantage of these insights to prevent it from appearing again in the future.
Verifi by Visa
Verifi offers similar chargeback prevention tools but focuses on Visa transactions. Its solutions help merchants, banks, and customers communicate better to reduce disputes.
Order Insight
Similarly to Ethoca Consumer Clarity, Order Insight shares transaction details with banks and cardholders before a dispute is filed. It’s especially helpful for fixing billing descriptor issues.
If a charge appears under a confusing name, Order Insight fills in missing details, so that customers are able to recognize their own purchases instead of reporting them as fraud.
Rapid Dispute Resolution (RDR)
RDR takes things a step further by automatically handling pre-disputes. If a customer contacts their bank about a charge, the system follows merchant-set rules to issue a refund instantly—before the dispute even starts. This prevents chargebacks without merchants having to get involved every time.
Cardholder Dispute Resolution Network (CDRN)
For cases that need a bit more attention, Verifi’s CDRN alerts merchants when a dispute is brewing. Businesses are given 72 hours to issue a refund or resolve the issue before it escalates into a chargeback.
Ethoca and Verifi in Chargeback Prevention
Ethoca and Verifi give merchants more control over chargebacks by improving communication between businesses, banks, and customers. Rather than waiting for the dispute to hit your system, using these tools help prevent them from ever happening to begin with.
In the long run, Ethoca and Verifi help merchants by:
- Sending alerts and automation directly to the merchant in order to solve these issues before turning into chargebacks.
- Improving customer satisfaction by shedding light on misunderstandings and providing timely responses.
- Helping them tackle fraud, which includes first-party fraud.
- Saving money and effort that would otherwise go into handling chargebacks.
- Safekeeping revenue in the merchant's wallet.
Chargeback prevention is about staying ahead of the problem. With Ethoca and Verifi, merchants can cut losses, protect their revenue, and keep customers happy while avoiding the headache of constant disputes.
How Chargeblast Helps with Chargebacks
Dealing with chargebacks can feel like chasing your tail, but Chargeblast makes it simpler. With seamless integrations with payment processors like Stripe, Shopify, and Payarc, it proactively prevents fraud and identifies potential chargebacks before they even happen.
Real-time alerts and smart automation keep your revenue safe, so you spend more time focusing on growing your business. Don’t let chargebacks slow you down!
Reach out today and see how Chargeblast can help protect your profits and streamline your process.
