You may land on Visa’s Chargeback Monitoring Program. Here’s why…

1 May

Beginning October 1, 2019 Visa is lowering their dispute-to-transaction ratio and is also lowering the threshold for fraud-to-sales ratio. While these new standards have not yet been announced to the public, Visa has informed the merchant acquiring community.

Today, for low-risk merchants, you will find yourself on Visa’s Chargeback Monitoring Program with a 1% ratio of sales-to-transactions and more than 100 chargeback disputes in a given month. This ratio will change to 0.9% after October 1, 2019. For high-risk merchants this ratio will lower from 2% to 1.8%. In both cases the total number of disputes in a given month will remain the same. But, the fraud-to-sales ratios will also be changing from 1% to 0.9% for low-risk and from 2% to 1.8% for high-risk.

Why is this such a big deal? If you end up on Visa’s Chargeback Monitoring Program you may find it super difficult to get off. Visa will give you a 3-month cure period to address your excessive chargebacks, that is after you provide a detailed plan, which in and of itself can be a drain on your resources. If you do not materially reduce your chargeback disputes, you will likely have your merchant account closed, or even worse, you could end up on the MATCH List (Terminated Merchant File). Any principles (the underwritten individuals who own and operate your business) who end up on the MATCH List will find it nearly impossible to get another merchant account for up to 5-years. This often means the end of your company or business.

So, what can you do? The best defense is a good offense. Your best strategic move to fight chargebacks will always be through your customer service department and customer handling. This is where you can make the largest impact. If your business is experiencing high chargebacks you should evaluate your return policies and your customer service experience. Treat your customer like a king and they will return the favor over and over.

If you would like help with chargebacks, or would just like to explore your online fraud strategy with us, feel free to contact us at or call us at +1-800-421-7898.

VCR and Chargebacks: How is your conversion going?

22 May

No, this is not a blog post from the 1980’s, nor is it a discussion of videocassette recorders. This is the biggest change in the history of chargebacks. This is the beginning of a digital revolution happening within the oldest of old school: consumer banking. And, if you don’t think you need to pay attention to this, you may want to consider a Betamax VCR…

Why is this such a big deal? Prior to the new Visa Claims Resolution (VCR) process, banks had up to 100 days to respond to a dispute. All while ecommerce merchants were held to a higher standard—something closer to 30 days. You may be asking, really? Why would Visa allow banks such latitude while holding ecommerce merchants to less than a month? The answer has to do with traditional 1970’s style banking, slow paper driven processes, and the lack of modern data standards. Now the tables are turned…

With VCR, banks are being forced into a modern digital process for claims resolution. Now, they are likely to respond in days. This places significantly increased pressure on ecommerce merchants, not only due to shorter response windows, but also potential fines imposed by the bank if the merchant fails to respond. Most banks are requiring a response in no more than 20 days; ideally you should respond in less than a week. This requires more time and effort on the part of your chargeback handling team. A merchant’s failure to adapt could result in higher losses as well as increased chargebacks.

Generally speaking, the VCR process requires ecommerce merchants to actively manage, with precision around compelling evidence, chargeback types, and response timeframes. The old “reason codes” have been replaced with two process categories: allocation disputes and collaboration disputes. Reason codes were sloppy and allowed ambiguity like “unrecognized transaction.” That now defunct reason code “75” was a short-cut when nothing else made sense. Now, your finance staff must provide clarity on whether the chargeback is fraud related or a consumer dispute.

Here’s the cool part: the process category model fundamentally changes from a litigation-based approach to one which assigns party liability: who has liability for the chargeback itself—the merchant or the issuing bank? The other cool part includes a new service Visa offers for merchant processors who want to directly integrate. It’s called Visa Merchant Purchase Inquiry. Using this service your merchant processor can have immediate and direct access to a consumer dispute before a chargeback actually occurs, much like a retrieval request. This could prevent a chargeback altogether, and could be a game changer.

As an ecommerce merchant what should you be doing today? First, you should do a comprehensive audit of your internal business processes surrounding your fraud strategy. You need to ensure you have the compelling evidence necessary for a proper response. Do you have shipping confirmation? Do you have bill to and ship to information? Most often chargeback handling falls on the shoulders of your finance team. You may need to re-train your teams if you want to avoid penalties associated with a non-response. Also, because of the liability assignment approach, the process for submitting a compelling evidence packet changes. These are a few things for you think about.

As it ends up, both VHS and Betamax are now history—you may be too if you don’t convert!

If you would like help with chargebacks, or to explore your ecommerce fraud strategy, feel free to drop us a line at

What Is A Chargeback?

18 May

A Chargeback is when a consumer calls their bank to dispute a credit card charge. This consumer is using a “dispute resolution process,” put in place by the credit card networks in order to deal with a merchant who failed to fulfill their obligations. Ironically, most of the time this consumer made no attempt to contact the merchant and is abusing a system put in place to protect them.

There are good chargebacks and bad chargebacks. Generally speaking, a good chargeback, or legitimate chargeback, happens when either the merchant failed to deliver on a promise made to their customer, or when a stolen credit card was used. A bad chargeback, or illegitimate chargeback, happens when the consumer fails to deliver on a promise made to the merchant, i.e., payment, or if they are trying to defraud that merchant.

Yes, consumers commonly engage in what’s called online theft. How many times have you been flipped off on the freeway versus flipped off to your face? When human interaction is removed or abstracted, we somehow feel better about behavior that we would never otherwise consider. Within the industry, we refer to online theft as friendly fraud. The overwhelming number of chargebacks filed by consumers are usually an attempt to steal from merchants, or to circumvent their return policies.

Your best offense against chargebacks is through your customer service department. This is where you can make the largest impact. If your business is experiencing high chargebacks you should evaluate your return policies and your customer service handling. Treat your customer like a king and they will return the favor over and over. Friendly fraud is a hostile act taken against your business. Why would your customer do this? This is the question you need to figure out.

When your customer first opens their credit card statement, emotions are high; they begin questioning every charge. At this time, your best hope is your customer has positive feelings about your company and it’s products. If you are REI, Nordstrom, or Southwest Airlines, you are in good shape. If you are United Airlines, or worse a company providing limited or questionable value, your best bet is that they can find your contact information instantly, and that your customer service answers quickly. These are a few ideas to think about.

If you would like help with chargebacks, or to explore your customer service handling, feel free to drop us a line at

Banks Promote Chargebacks as “The Easy Button”

21 Oct


At ChargebackOps we provide a hands-on, boutique service for each of our clients. We work hard to identify which business practices can lead to chargebacks. This past week one of our clients was testing their e-commerce system by placing a test order, and accidentally submitted the order. Not having the permission to reverse the order themselves, they immediately called their customer service department.

What they learned is not only did their e-commerce system lack the capability to reverse an order, their very own customer service department instructed them to “Call your bank and dispute the charge.” Unbelievable, yes. Why and how did this happen?

This happened because banks think of, and promote, chargebacks as “The Easy Button.” Banks make millions of dollars annually on chargebacks. In fact, most modern banks now have a “dispute resolution” self-service link in front of every card holder transaction. And unfortunately this spills over to each of us as the “intuitive” approach for handling customer service issues. While this may make intuitive sense, what this customer service agent did not realize was the cost to his company included the loss of the merchandise, the transacted amount, processor chargeback fees, damage to their merchant account, and of course created a bad customer experience.

News flash: if you have a problem with a retailer, please call them directly. And for you retailers out there, treat your customers like a King and they will reward you through the years.

If you would like help with chargeback fraud, or to discuss your fraud prevention strategy, drop us a line at

What Are Fraud Tools and Fraud Alerts?

26 Jul

CBOps Fraud Pic1

I am frequently asked the question about the difference between fraud prevention tools and chargeback fraud alerts. In order to understand this difference, think about the pre-order and post-order phases of a typical eCommerce transaction.

When a consumer buys something on the Internet they place an item in their shopping cart, enter their credit card information, and proceed with the order. To the consumer, this is seen as a single, autonomous transaction. To the underlying eCommerce system, the transaction is not quite complete. Prior to processing the order most modern eCommerce systems will work to validate the credit card and the likelihood of fraud. It is during this phase you would use a fraud prevention tool. Fraud prevention tools such as Kount and CyberSource’s Decision Manager use device fingerprinting and fraud scoring to assess the overall transaction risk. These tools can have a big impact on your overall fraud exposure by rejecting the order before it even takes place.

Chargeback fraud alerts on the other hand happen post-order, perhaps even weeks after the product has been ordered and shipped. Fraud alerts are a way, of sorts, to intercept a chargeback before it occurs.

In order to initiate a chargeback, a consumer first calls their card issuing bank to begin the dispute process. The fraud alerting networks, Ethoca and Verifi, each have agreements with different card issuing banks who share this dispute information with a merchant, prior to the card issuing bank actually filing the chargeback. This process works due to the limited response window in which the alert must be responded to by the merchant. Chargeback fraud alerts are most often used by high-risk merchants in order to reduce their overall chargeback rate. In most cases these high-risk merchants value the avoidance of a chargeback greater than they do the merchandise itself.

In summary, fraud prevention tools are a mechanism to fight fraud during the first stage of the fraud cycle and chargeback fraud alerts can be used to prevent chargebacks, which happen during the last stage of the fraud cycle.

If you would like help with chargeback fraud alerts, or to discuss your fraud prevention strategy, drop us a line at

What Is Friendly Fraud?

31 May


Retailers are long familiar with physical shoplifting, but as commerce shifts online, many are not nearly as familiar with a new type of fraud—Friendly Fraud, something akin to shoplifting, but perpetrated online…

Friendly Fraud, frequently referred to as illegitimate chargebacks, are a big problem for e-commerce, costing retailers over $12B annually (as reported by Visa). The FBI reports Friendly Fraud as one of the top risks to Global e-commerce. This fraud destroys a retailers’ margin and can even put a retailer out of business. Why does this happen and what can you do about it?

Like many things in life, when there is a loophole, humans will find a way to exploit it. The loophole here includes the lack of signature on the credit card transaction. With card-not-present (CNP) transactions it’s easy for a customer to call their bank and claim they did not receive the merchandise. Because there was no signature to prove or disprove this claim, customers often get away with this scheme. With today’s “The Customer is Always Right” mentality, most retailers take the customer’s account as the final word and never challenge the chargeback—but they should.

LexisNexis Risk Solutions reported fraud losses as a percentage of the retailers’ online revenue increasing from 0.68% in 2014 to 1.47% in 2016. This represents a staggering increase in fraud, and hurts their bottom line in a significant way. This can be deadly when coupled with the overall decrease in margin being seen by many online retailers. Approximately 80% of all chargebacks are Friendly Fraud. We find in better than 60% of these cases the customer never even contacts the retailer, so it’s not a failure on the retailer but purposeful fraud by the customer. Customers somehow feel this fraud is not quite the same as stealing from the retailer—but it is. Our advice is to challenge all Friendly Fraud chargeback cases.

Most retailers do not fight Friendly Fraud because they do not understand the process or feel it’s too expensive and time consuming. The most challenging part of Friendly Fraud is the human element—it’s very difficult to predict human behavior. You really have no idea who is doing it, for what reason, nor when it’s coming. But once you begin, you will see patterns. By challenging each Friendly Fraud case you will also send a strong signal to your customers that you will not tolerate this type of abuse. Customers commonly share on social media which retailers fight Friendly Fraud and which ones do not. Do not accept Friendly Fraud as a cost of doing business. There is no time like the present to begin challenging these cases.

If you would like help combating Friendly Fraud, feel free to drop us a line at

Should I Outsource Chargeback Management?

19 May

Swan River

Jack Welsh, former CEO of General Electric, wrote “Don’t own a cafeteria: Let a food company do it. Don’t run a print shop: Let a printing company do that. It’s understanding where your real value add is and putting your best people and resources behind that. Back rooms by definition will never be able to attract your best. We converted ours into someone else’s front room and insisted on their best. This is what outsourcing is all about.”

Outsourcing of chargeback management should be a strategic question for any online business. Chargebacks must be be tracked and understood as a key metric to understanding the overall health of your company. Chargebacks destroy operating margin and create a clear and present danger for any company.  Let’s consider the most important point in Jack Welch’s statement, “insisting on their best.” Think about this—If you can truly achieve “your best” you always win. Your tomorrow becomes better than your yesterday.

Chargebacks are the last stage in the fraud cycle and are usually an indicator of funk. You may have problems with your customer service policies, handling, or outsourcer, your shipping policies, return policies, or your billing descriptor, or perhaps the very product or service you sell. Wouldn’t you want all the intelligence you could gather in order to improve your company?

During the chargeback representation process much intelligence is gathered. The compelling evidence requirements set forth by the credit card schemes demand detailed information about each customer transaction. When you represent thousands of transactions, you can, and should, end up with killer trending data. You should gather, aggregate, and use this information to improve your product, service, and internal business processes. It’s unlikely your accounting or finance team will have the expertise to share and collect this information, let alone have the motivation or inclination to do so.

Returning to Jack Welch’s comments on outsourcing, “their best” is the key point here. When it comes to chargebacks, does your internal team have the specialization necessary to deliver “their best?” You will always see better results from a specialist. This is the very reason you hire a tax accountant for specialized tax work. Your finance and accounting teams are great at accounting, but chargebacks are usually an afterthought. Does your internal team even know which chargebacks to fight? Perhaps you are thinking, I already hired a chargeback outsourcer and I get little to no intelligence from them. Here’s my advice: demand “their best” or fire them, otherwise your outsourcing strategy is in vain and your tomorrow will suck.

If you are considering a chargeback outsourcer, drop us a line at In almost every instance we can provide better service at a price well below your internal staffing costs. We have a 100% satisfaction guarantee—and will always deliver “Our Best.”

Should I Fight Every Chargeback?

3 May

Every Chargeback

Let’s face it, chargebacks suck. They come as a surprise, they destroy your profit margin—if not your business—and many times they are used by your customers in an unfair manner. The most common question I hear over and over is “Should I fight every chargeback?”

Chargebacks are complex and there is rarely a one-size-fits-all approach. There are many things to consider when deciding whether or not to fight a chargeback. The first is whether the chargeback is fraud or non-fraud. If it’s fraud, is it a dishonest customer “cyber shoplifting” from you, known as friendly fraud or is it true fraud, the result of a stolen credit card? If it is non-fraud, why is your customer calling their bank rather than your customer service department? You must answer these questions before understanding the best approach for handling each dispute.

True fraud is pretty straight forward. Do not fight these. Why take up dispute with a cardholder who’s credit card has been stolen? This is a guaranteed way to piss off a good customer. This is also the reason I discourage the use of an automated chargeback solution. Fighting true fraud chargebacks will also hurt your reputation with your merchant processor.

Friendly fraud represents nearly 85% of all chargebacks. In the movie Confessions of a Shopaholic, Hollywood taught America how to defraud a company through chargebacks. In the physical world, we call this shoplifting. Online brands need to understand that failing to fight these chargebacks will likely cause this problem to grow. Many consumers now share on social media which companies fight friendly fraud and which ones do not. Using a responsible, rational decision making process gives a merchant the ability to fight friendly fraud with confidence.

The last chargeback category is non-fraud. This can be tricky and is many times a tell-tale indicator you have funk in your company. Introspection is the key here. Why are your customers going to their bank rather than your customer service department? Does your product suck? Do your customers know how to contact you? Do you have a problem with your billing descriptor? While I would encourage you to fight these, even more important is getting to the bottom of why your customer’s are charging back.

If you would like a free audit of your chargeback strategy send us a note to

How can I reduce chargebacks?

28 Apr

Reduce Chargebacks

Why should I think about my descriptor? If you care about the health of your merchant account, you should be very concerned about your billing descriptor.

Descriptors are controlled by your merchant processor, and while they have lots to say about what your descriptor should look like, they rarely take into consideration the bigger picture of your customers and business. To make matters worse, descriptors are cryptic, old school, and subject to many limitations. But, getting your descriptor right can pay hefty dividends.

On the end of your billing descriptor sits a customer, a credit card statement, and lots of emotion when it comes to paying the bill. If your customer can quickly recognize a charge, and more importantly locate the customer contact information for that charge, there is a good chance they will call you before they call their bank. The moment your customer calls their bank you lose big.

The company Basecamp (formerly 37Signals), reduced their chargebacks by 30% by simply adding a clever direct customer service URL, of sorts, to their descriptor. More importantly, this URL addresses the question 37Signals knows the customer has at that very second — what is this charge? This makes the information more relevant than if the customer had called a generic customer service phone number.

I would recommend the following when setting up a billing descriptor:

  • Make every attempt at getting your phone number on the first line of your descriptor. While many banks allow for a second line of information, this rarely prints on credit card statements, and online systems usually require a “click to expand.”
  • If you have recurring payments, use a specific phone number and wording that explains the charge rather than pointing them to a general customer service phone number. This may require a separate merchant accounts for recurring and non-recurring charges.
  • Create your descriptor and phone number with the information that aligns with your website. This creates a link between the purchase and the cardholder.
  • In general, use wording that will allow your customer to easily identify the product and / or company that they have purchased from. The easier this process is the less likely the cardholder will dispute the charge.

We are passionate about billing descriptors due to the number of fraud and non-fraud alerts we manage through Ethoca and Verifi. We have found we can increase the number of alerts by up-to 20% by auditing our customer’s descriptors. During this audit we find all sorts of funk which leads to more effective descriptors for each of our customers.

If you would like a free descriptor audit send us a note to