Cutting Chargebacks IN HALF
Over the past couple of months I’ve been talking to many clients about our new offering and our conversations would follow what quickly became a familiar pattern. I would start with the features listed above, which would typically raise my client’s interest, but he or she would not necessarily go crazy about it. Yes, it would be a nice product to have, but nothing revolutionary.
And then I’d tell them that our new service would cut their chargeback rates in half (at least) and that’s when they become all ears. “You would cut my chargeback rate in half?! How?”, they would ask skeptically.
Well, we are using a really simple process and one that I cannot believe we didn’t think of before and I feel like kicking myself! To help you understand it, let me go over the transaction process first:
- At checkout, the customer makes one payment for the product or service she’s bought.
- The customer’s payment is processed as two transactions: one for the purchased item itself and another for the insurance, associated with the program. So, the customer will see two separate transactions on her credit card bill.
- Our program bills the merchant for the cost of the insurance to complete the cycle.
Looking at the second step of the process above, you will realize that, if 100 percent of the sales were insured, the number of transactions processed would automatically double.
And as the chargeback rate is calculated as the ratio of total charged back transactions, relative to the total sales transaction count (as opposed to volume), you see that the chargeback ratio is cut in half right there.
Furthermore, if there is an issue with a given transaction, at least some of the affected customers would call the insurance provider first and their complaint would be resolved before they reach out to their credit card issuer, which further reduces the chargeback rate.