The Dangers of Having A High Chargeback Ratio – Avoiding Account Termination

One of the key requirements vendors have to meet to succeed in the modern e-retail ecosystem is low chargeback rations. Even third-party Payment Service Providers, who can’t control the flow of transactions, are taking these requirements very seriously.  

Online vendors with high chargeback ratios will face dire consequences. Hiring experts to set up an acute chargeback management system is the only option for vendors and PSPs. 

The severe implications of having a poor chargeback ratio are making vendors nervous. Many platforms that host merchants are setting stricter requirements. For instance, a platform may only allow vendors with less than a 0.05% chargeback ratio per month.  Therefore, the demand for efficient chargeback management outsourcing service providers has increased tenfold. 

The Ever-Increasing Threats

In 2020, the global e-commerce industry witnessed a 209% revenue growth. This massive growth in just one year was accompanied by an increase in the number of fraudulent transaction attempts by 3.8% in April 2020. Amidst these never-ending fraud attempts, many vendors and PSPs are struggling to meet the strict chargeback rules. Here’s how the chargeback requirements will impact online businesses. 

· Sellers with chargeback ratios as low as 0.01% will be given privileges, such as easy access to SCA exemptions or more leniency with payment service providers. 

· Merchants with chargeback ratios over 0.13% will be added to watch lists. Their transactions will be harder to process. For instance, a small transaction is usually exempt from strict SCA protocols, but merchants with chargeback ratios over 0.13% will not be granted such privileges. 

· Once the monthly chargeback ratio surpasses the 1% mark, acquiring banks will terminate at-fault merchant accounts.

· If the value of charge-back transactions is more than $5,000, the vendor will be added to the “High-Risk Merchants” list.

Unavoidable Expenses 

Without efficient eCommerce chargeback management software, vendors will keep bleeding money. Poor chargeback ratios send vendors down the road to account termination or worse, bankruptcy

With each chargeback filed by a customer, merchants are hit with charges. Even if the chargeback claim is disputed after a few days, merchants still have to bear the administrative costs of fighting the claim. Buyers who hold on to the product after filing the chargeback get a free product. All losses from that sale have to be undertaken by the vendor. 

If monthly chargebacks amount to over $10,000, vendors may face additional fines. After repeat chargebacks, banks can stop doing business with particular merchants. Sellers will have to sign-up as high-risk merchants. High-risk merchants have to pay high processing fees that pretty much eliminate any profits.

Teaming Up with Experts to Prevent Losses

Between 2015-19, malicious hackers stole the private data of over 500 million customers. Credit card fraud was one of the key instruments used by these hackers.

As a result, major financial institutions have decided they cannot tolerate high-risk merchants anymore, and many have already had up to 30% of their payments withheld by authorizing banks. 

Thankfully, vendors who team up with dedicated providers of chargeback management outsourcing service avoid such losses. Here is what the experts are doing to help businesses avoid losses.

· Ensure all dispute processes are carried out in time.

· Track, monitor, assess, and report valuable data regarding chargeback requests to their clients. 

· They invest in the latest chargeback management technology. Investing in e-commerce chargeback management software helps these experts create perfect cashback ration management strategies. 

Chargeback management experts help clients consistently meet their chargeback requirements. Their role is vital to the global e-Commerce industry.

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Created on Sep 30th 2020 21:27. Viewed 292 times.

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