In 2017, retailers and issuers lost around $31 billion because of broken chargeback processes. Reversal of transactions or chargebacks because of delays or miss outs diminished the profitability of retailers and negatively impacted their business. Chargebacks are painful but retailers have to deal with them.
Smart retailers avoided chargebacks by integrating processes in order and running them in a well-oiled manner. However, still many of the retailers have not prioritized integration or lack the problem-solving prowess.
Chargebacks are transaction reversals similar to traditional refunds where the customer asks the issuing bank to refund an amount. If the bank upholds a cardholder's request then the funds are forcibly removed from the merchant's account. The customer is not obligated to return the purchased product. This transaction reversal prevents customers from fraudulent activities committed by the merchant or other individuals.
Chargebacks are also a type of compliance failure. They are imposed on enterprises for missed Service Level Agreements (SLAs) caused by infrastructure challenges, hardware failures, connectivity issues, and manual processes. These SLA violations are caused when products are labeled incorrectly, delivered to wrong locations or delivered, shipped at the wrong time, or carry incorrect bill of laden (BOL).
To understand chargebacks, we need to understand it from customer standpoint. Online merchants should know how it works. A normal chargeback process entails the following steps:
Step 1: The respective cardholder files a dispute against a transactional fraud in liaison with the issuer. The submission of such disputes eventuates either on a smartphone or via online forms.
Step 2: Next, the issuer analyzes the dispute to evaluate its authenticity. He or she will forward the dispute to the card network should the filed dispute is recognized as genuine. The dispute can be:
Invalid dispute: In case, the dispute is recognized as invalid, it is rejected right away thereby terminating the chargeback process altogether.
Valid dispute: If detected valid, the chargeback procedure continues to remain in the card network. And the dispute has deemed a chargeback now.
Step 3: Following the submission of the chargeback to the card network by an issuer, it is forwarded to the acquirer. The fee is charged and the chargeback is finally transferred to the merchant.
Step 4: As the chargeback reaches the merchant, he or she gets hold of the set of instructions to gather evidence that directly relates to the chargeback reason code. This communication occurs either in an offline letter or the merchant account processor’s online portal to ensure surety.
Step 5: Now, the merchant decides to either respond or ignore the chargeback.
When merchant decides to respond, he or she will accumulate evidence related to cardholder and transaction, including date/time stamp, device usage, shipping verification, address verification, CVV match, device fingerprinting, geolocation, past transactional history, subsequent transactions from the customer and communication with customer if any, and other data related to the transaction.
When the merchant decided not to respond, the chargeback procedure is considered complete and the case is skewed in favor of the customer.
Step 6: The gathered evidence is reviewed by the acquirer in and out. The information is passed on to the card network, following which the chargeback is transferred to the issuer on behalf of the merchant.
Here, two different scenarios can crop up:
The evidence does not support the chargeback: In this case, the issuer will decline the chargeback. Also, the funds are returned into the merchant commercial bank account with the help of acquirer.
The evidence supports chargeback: Here the chargeback process is terminated and funds remain with the issuer or customer respectively.
Step 7: The customer can file a second chargeback.
Conventional technologies to integrate and align processes are heavily code-based and difficult to use. They consist of a series of steps and IT intervention and not always reliable. These steps lead to delays and disruptions making enterprises difficult to work.
Moreover, Users don't get a single interface to track orders and monitor them in transit. They generate Incorrect Advance Shipping Notice (ASN) because of which goods are placed on wrong shelves. Retailers waste several hours of time in manually tracking the shipment or finding the correct ASN. These issues lead to excessive fines, costly chargebacks, and loss of credibility.
A well-tailored integration strategy keeps the processes, technology, and information systems humming. It provides the resiliency and to support demands and leveraging relationships. Enterprises get the ability to map and invoice data. They can reconcile invoices and remove exceptions without delay. In this way, they can meet SLAs, avoid miss outs, and prevent chargebacks.
Streamlined Onboarding: Enterprise integration streamlines onboarding and increases collaboration across the supply chain. Enterprises can build a value-added network which helps them to keep the products rolling without delays. B2B participants can use any-to-any conversion capabilities for sharing data in a fast and efficient manner. Business users can build data mapping flows with drag and drop ease and improve customer journeys. They can handle requisitions & invoices data and transact upon that data for better results.
Transparent Supply Chain Process: Fully integrated systems can be closely evaluated for applying chargebacks. It becomes easy to correlate data and reduce ASN errors. Data from every source can be monitored and tracked for appropriate chargebacks and reimbursements.
Prompt Invoices: Start-to-end integration enables enterprises to handle invoices in the stipulated time. Users can assign an error handling or exception handling process that lets them why an invoice is flagged, assign invoice, monitor invoice, send reminders, escalate a situation, and generate reports.
Adeptia provides a fit-for-purpose solution for eliminating the problem of retail chargebacks. The solution tightly integrates retail processes, automates onboarding, and eliminates manual processes. Retailers can leverage the platform at every turn and become more competitive in the marketplace.