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A Merchant’s Guide to Chargeback Management 

A Merchant’s Guide to Chargeback Management 

Whether they stem from customer disputes, friendly fraud, or even criminal activity, chargebacks can pile up quickly, putting your revenue, reputation, and even your ability to process payments at risk.

Chargeback management can feel like an uphill battle. It’s a time-consuming, detail-heavy process that involves strict deadlines, extensive documentation, and constant analysis. If you’re not careful, it can eat up valuable resources and distract you from running your business.

But here’s the good news: you don’t have to tackle chargebacks alone or without a plan. SecureGlobalPay will guide you through the essentials you need to simplify and streamline the process.

QUICK TAKEAWAYS

  • Chargebacks are costly and can jeopardize your business's profitability and payment processing capabilities if not managed effectively.
  • Merchants have three primary ways to handle chargebacks — building an internal team, using chargeback management software, or outsourcing to a third-party provider.
  • An effective chargeback management strategy goes beyond resolving disputes — it emphasizes identifying and preventing the root causes of chargebacks.

What is chargeback management?

Chargeback management is the process of handling and resolving payment disputes initiated by customers through their banks. 

When a customer files a chargeback, it essentially reverses a transaction, pulling funds from your account and holding them until the issue is resolved. This process involves multiple steps, including gathering evidence, responding to claims, and, if necessary, disputing invalid chargebacks.

While it may sound straightforward, chargeback management is anything but simple. It’s a complex process that requires attention to detail, quick response times, and a thorough understanding of payment processing rules.

Each card network (Visa, Mastercard, etc.) has its own set of rules and timelines, and failing to comply can result in losing disputes by default—even if you’re in the right.

On top of that, chargebacks don’t just cost you the transaction amount. You’ll also face:

  • Chargeback fees
  • Potential penalties
  • The risk of losing your payment processor (if your chargeback ratio gets too high). 

For busy merchants, staying on top of chargebacks can quickly become overwhelming without the right systems in place.

Main options for chargeback dispute management

Merchants have several options to handle disputes, each with its own benefits and challenges. 

Some businesses choose to build and manage their own internal chargeback teams, while others prefer leveraging specialized software or outsourcing the entire process to third-party experts.

The pros and cons of different approaches to chargeback management.

Handle chargebacks by building an internal team

For large organizations with enough resources and expertise, building an in-house chargeback management team can be a viable option. This approach gives you complete control over the dispute process.

To manage chargebacks effectively, you’ll need a dedicated team that includes roles such as:

  • Chargeback analyst: Responsible for reviewing disputes, collecting evidence, and preparing responses.
  • Chargeback manager: Oversees the team, monitors performance, and ensures compliance with payment network rules.
  • Fraud prevention specialist (optional): Focuses on identifying patterns and implementing fraud prevention strategies to reduce chargeback rates.

Your team will also need access to tools that streamline the dispute process. This might include a chargeback management platform for tracking cases, payment processor portals for submitting evidence, and fraud detection tools to help reduce preventable chargebacks.

Robust and secure payment gateways, like the one SecureGlobalPay offers, come with basic and advanced chargeback management and fraud prevention tools, including Kount, RDR, iSPY, etc.

While this approach offers flexibility, it comes with challenges. Hiring and training staff can be time-consuming and expensive. Staying on top of ever-changing chargeback rules and deadlines requires constant attention and expertise. 

For small and medium-sized businesses, dedicating resources to an internal team may not be cost-effective compared to other options.

Use chargeback management software

Dedicated chargeback management software is designed to automate much of the chargeback process. It saves time and reduces the risk of human error with features like:

  • Case tracking and management: Keep tabs on disputes in real time and organize documentation in one central hub.
  • Automated responses: Generate and submit evidence for disputes based on pre-set templates and rules.
  • Root cause analysis: Identify patterns in chargebacks to uncover the underlying issues, such as fraud or operational errors.
  • Real-time alerts: Get notified of disputes as soon as they’re initiated to respond promptly within deadlines.
  • AI analytics: Leverage artificial intelligence to improve success rates by analyzing data from past disputes and suggesting optimized responses.

Most solutions should be able to integrate with your existing payment processor and fraud prevention tools, making implementation straightforward. 

However, these tools aren’t a perfect fit for everyone. While they reduce manual effort, they still require oversight and expertise to ensure proper use. Additionally, pricing can vary significantly, with some solutions charging flat rates and others using performance-based pricing tied to recovered funds.

For merchants who want to remain hands-on but need help simplifying and speeding up the process, chargeback management software can offer the perfect compromise between a fully manual approach and outsourcing.

Outsource everything to a third-party

Want to take the hassle out of chargeback management entirely? Outsourcing to a third-party service can be an attractive option. These specialized companies handle the entire process on your behalf, from monitoring disputes to submitting evidence and analyzing trends.

Here’s how it works: once a chargeback is initiated, the third-party provider steps in to gather the necessary data, build a strong case, and submit it to the issuing bank. They often have dedicated teams and advanced tools to navigate the complexities of the process — while ensuring compliance with payment network rules and deadlines.

Outsourcing chargeback management to a third-party provider can save time, provide expert handling, and scale efficiently for high-volume merchants with lots of disputes. However, outsourcing comes with costs that can add up and may reduce your control and visibility over the process. 

Choosing the right partner is crucial, as the quality of service can vary significantly between providers.

How to build an effective chargeback management strategy

An effective chargeback management strategy focuses not only on resolving disputes but also on identifying and preventing the root causes of chargebacks.

The three most common causes of chargebacks are:

  1. Criminal fraud: Unauthorized transactions resulting from stolen card information.
  2. Friendly fraud: Legitimate customers dispute charges they don’t recognize or remember making.
  3. Merchant error: Mistakes such as incorrect billing, poor customer service, or unclear return policies.

To build a robust strategy, merchants should:

  • Focus on prevention: Implement fraud detection tools, ensure accurate billing, and provide clear communication with customers.
  • Analyze data: Regularly review chargeback patterns to spot trends and identify areas for improvement.
  • Track key performance indicators (KPIs): Monitor metrics such as chargeback ratio, win rate, and average resolution time to measure the effectiveness of their strategy.
List of ways to prevent future chargebacks.

By taking a proactive approach, you can minimize disputes and ensure smoother operations. Remember, chargeback management isn’t just about winning disputes — it’s about creating a seamless experience that prevents them in the first place!

How SecureGlobalPay helps merchants handle disputes and chargebacks

If your chargeback rate is over 1%, your business likely falls into the high-risk merchant category.

SecureGlobalPay offers everything you need to start accepting and processing payments, offline or online. We work with both retail and high-risk merchants. As such, with SecureGlobalPay, you get access to:

  • Expert guidance: Our account managers are industry veterans who can advise you on your chargeback management strategy. 
  • High-risk merchant accounts: We provide tailored payment processing solutions for high-risk and high-volume merchants.
  • State-of-the-art payment gateway: Our secure, robust payment gateway offers enhanced fraud protection and chargeback management tools. If needed, you can also integrate it with most standalone chargeback management solutions.

By partnering with SecureGlobalPay, you get access to technology and dedicated support that will protect your business, streamline chargeback processing, and keep disputes to a minimum.

Learn more by reaching out to partners@secureglobalpay.net or fill out our online application form:

Merchant Application