We dismiss any talk that the card brands are making it more difficult to maintain merchant account services, especially if it’s coming from e-commerce merchants. We believe the opposite is happening, that the crackdown on chargebacks over the last two-plus years, is for the greater good; and merchants need to comply or risk losing banking privileges.
That’s the silver lining in the climate we’re in: What might be lost in the frustration and scrambling to comply with Visa’s diminishing chargeback tolerance is that it’s truly never been more accommodating or resourceful times to fight chargebacks.
Why the time is now to reduce chargebacks
E-commerce chargebacks are at their highest levels primarily as a result of friendly fraud – when a deviant consumer makes and receives an online purchase, then issues a chargeback with his/her credit card issuer claiming never to have received it. Friendly fraud is at an all-time high. Catching deviant consumers before they succeed is difficult, but not impossible.
Because friendly fraud chargebacks are so frequent and costly, the card brands have had enough. According to a recent infographic by Chargebacks911.com, fraudulent chargebacks will cost merchants approximately $25 billion by the year 2020. Thus, the giant card brands are cracking down on merchants to become their own task forces, or risk losing their merchant account services.
- Until 2016, chargeback rates of 2 percent of sales or 200 per month were permissible. Visa halved that standard effective Jan. 1, 2016.
- Visa also applied a ‘pre-monitoring program’ for merchants whose rates were over 0.75 percent of sales or 75 chargebacks per month beginning 2017.
- Recently, Visa made big changes to its reason code scheme (now referred to ‘dispute codes’) as well as merchants’ rebuttal time (from 45 days to 30 days, eventually 20).
Without question, these are significant changes that not all merchants have or will embrace. We believe it will create a ‘survival of the fittest’ climate, in which merchants who consistently, diligently dispute chargebacks will thrive and maintain good relations with their acquiring banks and the card brands as a result.
And they’ll become better business people.
More resources available than ever to fight chargebacks
Though the climate for chargebacks is calling for urgency, the card brands have indicated that they’re willing to work with merchants to reduce their chargeback rate, evidenced by its fourth quarter 2016 announcement of the aforementioned ‘pre-monitoring program.’ When a merchant might hover near the 1 percent/100 per month threshold (at a minimum of 0.75 percent of sales or 75 chargebacks per month), Visa will notify the merchant and offer options to lower chargeback rates to a minimum – with the intent of preserving merchant account services.
Additionally, escalating chargeback rates and new standards for mitigating chargebacks have created a new, competitive market for third-party chargeback management firms such as Chargebacks911, Kount and SiftScience. While many merchants – small and large – often believe that third-party firms may be too expensive, these firms are saving and recovering revenue, passing on knowledge how to do so.
Anywhere between 7-10 years ago, such alternatives and resources didn’t exist.
Free information on fighting chargebacks: where to find it
As a merchant account services provider for high risk industries, Instabill knows the devastating effect chargebacks can have on an e-commerce business. It’s largely the reason why we created Instabill.org, a free online guide for merchants detailing the chargeback process, pre-emptive strategies and even how to handle a chargeback reversal.
Additionally, a quick search of ‘chargeback prevention,’ or a related term, will list the top companies – such as the aforementioned Chargebacks911, Kount and SiftScience– each of which hosts monthly webinars and offers e-books, whitepapers and plenty of other resources on effective methods to prevent and mitigate chargebacks.
High risk merchant account services from Instabill
With a high risk merchant account from Instabill, we feel the payment processor-merchant relationship is merely the beginning. Once a merchant begins processing transactions, Instabill remains on hand as expert merchant account services consultants.
Speak with one of our merchant account experts at 1-800-530-2444 today.
