The Complete Guide to Chargeback Protection & Management for Merchants

If you’re a business owner that accepts payments, you know how critical it is. Using and implementing a certain technique has the potential to have an impact on your ability to generate income. Credit card use and other digital means have increased rapidly since the abrupt increase in the use of digital marketing techniques.

What are Different Chargeback Frauds?

To properly prepare for Chargeback Representation, the offshore merchant processing must first be aware of the numerous scams that may impact their business. Chargeback scams include the following.

  1. Friendly Fraud 

According to a recent study, friendly fraud is the primary cause of chargebacks reported to the card network. When a consumer files a chargeback without first requesting a refund from the business, this occurs. Friendly fraud is likely to occur if the client does not have full information about the refund and replacement policy.

  1. Chargeback Fraud

Chargebacks are used when a consumer engages in fraudulent behaviour. Chargeback fraud and friendly fraud may be difficult to tell apart. However, a business may avoid fraud by taking preventative steps.

  1. Merchant Mistake 

Chargeback processing errors may be made by the offshore merchant processing as well. A blunder may cause the product to be delivered late or damaged. A late transaction reversal also falls under the merchant error.

Chargeback Protection Programs for Merchants

So, how do chargeback protection services work in practice? See how some of the most well-known people respond. 

  1. Stripe Chargeback Protection

Stripe Radar is in charge of Stripe’s chargeback prevention mechanism. Stripe’s fraud detection technology, Radar, is powered by artificial intelligence (AI).

During an eCommerce purchase, the system flags high-risk buyers and asks for more information. The checkout process is streamlined for less frequent buyers. If you’re charged with anything, you may be denied entry due to safety concerns. In certain cases, Stripe allows you to manually override the objection, but the transaction will no longer be protected against chargebacks.

As long as you’re within Stripe’s “protection limit,” if a protected charge causes a chargeback, you won’t be liable for any chargeback costs. Stripe has the right to sue you if you make a fraudulent purchase. The annual chargeback cap for American businesses is now $25,000.00.

  1. Square Chargeback Protection

Square provides free chargeback protection to businesses with good accounts and low-risk transactions. Square, like Stripe, searches for fraudulent behaviour patterns and attempts to prevent them. Unusual transactions will be reported to the merchant.

Square will also assist you if you have a disagreement with your bank and will let you know if more information is required to defend the charge. Additionally, there are no dispute costs associated with using Square.

Because it’s free, Square’s chargeback protection is an excellent value for small-ticket businesses. However, Square’s chargeback protection only covers purchases worth $250 per month, making it insufficient for companies that deal with big transactions regularly.

  1. PayPal Chargeback Protection

You may be thinking of the Seller Protection program when it comes to chargeback protection. However, PayPal’s chargeback protection includes certain fraud detection capabilities by default. Chargebacks that don’t fall under Seller Protection are subject to a $20 fee from PayPal.

The money may be blocked while PayPal investigates a transaction dispute if PayPal’s Seller Protection protects the transaction. To put it another way, this implies that PayPal will take the initiative in resolving the issue.

To qualify for Seller Protection, you must provide proof of shipment and delivery. Regarding transactions, PayPal will inform businesses which ones qualify for fraud protection and how to utilize it. 

Unauthorized transactions and products not received by the buyer may be protected. Only non-delivery transactions are protected.

  1. Kount

So far, you’ve focused on payment processors’ direct chargeback protection services. However, they aren’t your only choices. Payment processors and fraud prevention services like Kount often work together.

With Kount’s AI-driven fraud detection capabilities, you’ll be able to spot problematic accounts and keep your money safe from scams. Braintree and other payment processors appear to work nicely with Kount’s API. If Kount’s detection system doesn’t flag a transaction, Kount covers all chargeback costs in full.

The price of Kount is secret, therefore it is likely to change depending on transaction volume and risk.

  1. Chargebacks911

For Clover users, Chargebacks911 is an option since it is a stand-alone service that can be connected with a variety of backend processors, including FirstData.

Chargebacks911 is an example of a service that uses software to search for patterns in chargeback fraud and chargeback presentation. However, you will be given a personal account representative who will help you as required. Chargeback reversal rates of at least 40% are required for profitability.

Like Kount, Chargebacks911 has no way to know upfront how much a service will cost. It’s too expensive for small companies, but if yours has a large number of chargeback issues, you should look into it.

See Also: UX UI Design Experts For Your Ecommerce Business

How Do You Find A Chargeback Management System?

Having to deal with card-based fraud is a huge burden. After all, you’ve got a company to manage. The usage of a chargeback protection system for offshore merchant processing is one method to relieve yourself of some of the stress. It’s possible to categorize them into three main groups.

  1. Proprietary Systems

Chargeback protection is a standard or optional feature offered by many payment processing providers. If you’re using an “all-in-one” service like Stripe, you’re probably running into this issue. You don’t have to be concerned about your payment service infrastructure not being properly connected with this technique. The drawback is that if you prefer a different fraud prevention provider, your processor may not support it.

  1. Software Partners

A chargeback protection program may be available via an authorized partner if your payment processor does not provide one directly. As an integration, this is essentially chargeback protection. Depending on your payment processor, you may be required to pay separately for this service, or it may be included as part of a package.

  1. Third-Party Services

Included in this category are products such as software and services that complement your payment processing operations. Unlike software partners, these companies are not required to be recommended or integrated into your payment processor. You’ll be responsible for any integration problems, but you’ll be free of your payment platform’s restrictions.

Conclusion

Both Visa and Mastercard have systems in place that categorize businesses based on the number of disputes and chargebacks they get. You do not want to be labelled as a high-risk individual.

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