How to Prevent Chargebacks by Means of Ethoca Alerts

Why Preventing Chargebacks Is Essential

Clearly, an issued chargeback always means lost revenue for a merchant. However, that’s not the only downside of a reversed transaction. There are several other problems sellers have to deal with because of chargebacks. The list includes:

• Reduced customer flow. A high chargeback rate can significantly damage the brand’s reputation. Striving for quality products and services, potential clients might omit such a business to prevent their financial losses.
• Lower team productivity. As chargeback cases need to be resolved, the team might be too preoccupied with this task, which leaves less time for other assignments.
• Limited business connections. Merchants with a high chargeback rate are often deemed unreliable by other companies, financial institutions, and payment processors. A bad reputation becomes a serious obstacle for building beneficial partnerships, restricting business development.
• Penalty fees. Sellers with high CTR risk are getting enrolled in the merchant monitoring programs that implement penalty fees to motivate sellers to improve their performance. This means even greater financial losses that might severely impact the business.
• Bankruptcy risk. Restricted customer flow, lack of quality business connections, penalty fines, and low productivity result in significant expenses and a lack of revenue to cover them. When the seller is unable to gain profit after paying what they owe to their partners, acquirers, and payment processors, the business eventually closes down.

Implementing chargeback-preventing strategies is vital for the company's development. Merchants can deal with chargebacks efficiently with the help of automated solutions, such as Mastercard’s Ethoca, available within MidArmor.

What Is Ethoca?

Established in Toronto, Canada, in 2005, Ethoca has grown into a leading global technology provider. They work in close partnership with financial institutions (issuers) and online retailers (e-commerce merchants) worldwide to offer innovative solutions focused on combating the ever-evolving threat of chargeback and fraud, recovering revenue lost to fraudulent activities, and proactively preventing costly chargebacks. Their network provides real-time alerts, notifying merchants of chargeback disputes being filed. This immediate notification empowers businesses worldwide to proactively address pre-dispute cases and resolve them swiftly, safeguarding their financial stability and customer relationships.

How Do Ethoca Alerts Work?

Chargeback resolution with Ethoca Alerts includes several stages. Let's delve deeper into how this instrument operates to help businesses manage disputes efficiently.

• Stage 1 A customer contacts their bank and requests a transaction reversal.
• Stage 2 The bank informs Ethoca about the dispute in the process.
• Stage 3 Ethoca promptly sends an alert to the merchant about the issued chargeback.
• Stage 4 The merchant has a window of 24 hours to respond to the transaction reversal request.
• Stage 5 The merchant refunds the customer, informs Ethoca about the refund, and Ethoca communicates the outcome to the bank.

Ethoca automatically refunds customers while a chargeback transaction is still in a pre-dispute stage. As the transaction is reversed, the company avoids processing fees, potential enrollment in monitoring programs, as well as penalties and fines. As practice shows, refunding a customer immediately ends up being at least twice as cheap as dealing with the consequences of a finalized chargeback dispute.

At the same time, the merchant can also challenge the reversed transaction. If you are confident that the chargeback operation has no legitimate reasons behind it, you can try to win the dispute. As a rule, e-commerce sellers win only in 30% of cases. Ultimately, this route is a good option only for large disputed transactions (over $100), when the sum at stake is worth the risk.