Perhaps we’re being overly optimistic, but we think there are good days ahead for online merchant services account holders who might dangerously hover around the 1 percent of sales/100 per month chargeback threshold. Simply stated, we think it’s going to force the majority of them to become better communicators – most importantly with their customers and with their payment processors and acquiring banks.
During chargeback disputes, we’ve long advocated for communication between the merchant and the customer – it is proven to work based on some numbers we found below.
Why online merchants must have their own ‘collaboration’ process
Our sales staff is on the phone nearly all day, every day, pre-vetting merchants and discussing the best acquiring banks for online merchant services account solutions. To a lesser degree, we like Skype too, as it offers one-on-one dialogue (though less personal), but we prefer the telephone.
One-on-one saves everyone time and money. While some businesses prefer automation, we’ve always been proponents.
It is largely why we’re big fans of the recently enacted Visa Claims Resolution, particularly the collaboration workflow, because it emphasizes communication during a chargeback dispute. Visa is hopeful its collaboration and allocation models will lead to a 14 percent drop in chargeback disputes reaching the arbitration stages.
We think that 14 percent could be higher.
While most chargeback disputes are likely to be assigned to the allocation channel (anywhere between 60-80 percent of all disputes), we think merchants should embrace the ideology behind the collaboration model – in which they and the consumers share any and all pertinent information regarding the transaction that has been charged back. We’re simply saying that open dialogue with your customer usually leads to good things, like a resolution.
Recently we came across a study regarding communication in a time of dispute.
- 56 percent of the time, a favorable resolution is accomplished when there is conversation, be it by telephone or chat.
- In 28 percent of the disputes examined, a resolution is reached with there is a refund or replacement product given.
- It was only 16 percent of the time that a favorable outcome was not reached by all parties.
Purchasing an item online is a very un-personable, un-social experience. Communication with the customer brings ‘humanness’ and personhood to a transaction.
We’ve been advocating communication a long time
About a year and a half ago, we penned a blog post about preventing chargebacks by communicating with the customer. The idea came from a very successful merchant we know who sells and ships live and frozen lobster dinners within the continental U.S. overnight. Considering the significant amount of risk involved in his business – overnight shipping of live lobsters and other edibles, coupled with the usual shipping risks – he never incurs more than one or two chargebacks each year. Considering his sales volume (more than 8,000 orders per year) , it is an impressive figure.
How does he do it?
Communication. Proactive and active. Not reactive.
- Whenever there are signs of a possible dispute, such as shipping delays due to weather in certain parts of the U.S., our merchant colleague will telephone his customers notify them of such.
- When he sees large orders come in, especially from a first-time customer, he’ll call them to make certain the order is correct, meanwhile vetting the customer to make certain the order is legitimate.
- When a customer has a complaint – perhaps the order arrived a day late or an item was missing – he contacts that customer and offers them something in return such as 20 percent off or free shipping and add-ons to their next order.
- He has periodic e-mail alerts in place, notifying customers of order status, as well as deals and giveaways.
In the seldom events he does incur a chargeback, our colleague will contact the customer and offer a full refund in addition to perks on their next order. He’ll also politely ask them to reverse the chargeback and educate them how it damages a business, that a refund and contact are the best options.
Online merchant services account solutions: We’ll stick with our model
When it comes to our online merchant services account solutions, we prefer to have an initial telephone conversation with all prospective merchants, initially to get a feel for their business and to see what banking solutions we can offer. Within 5-10 minutes, we’ll know what the best solution is and give you the next steps to expedite the process.
Do you have 10 minutes to discuss online merchant services account solutions? Call us at 1-800-530-2444.