Chargeback Deflection and Insurance: How to Protect Your Profits

In today's fast-changing business world, protecting your company from potential risks is key, especially regarding chargebacks. For merchants, any chinks in the armor of a customer relationship management system result in lost revenue. Two useful tools that can help safeguard your bottom line are chargeback deflection and insurance. Let's take a closer look at how these features can shield your business.

Chargeback Deflection: Battling Unfair Chargebacks

Chargebacks - when customers dispute transactions and revenue is withheld by the processor - are a huge headache for merchants. They can happen for several reasons: fraud, misunderstandings, or unauthorized purchases. Whatever the cause, chargebacks drain a business owner’s time and profits.  Let’s face it, the chargeback process heavily favors the consumer. The chargeback process is designed in a way that puts merchants at a disadvantage. Even in situations where the merchant has evidence to win a chargeback dispute, they still end up losing money. This is because a chargeback results in additional fees for the merchant - sometimes up to twice the amount being disputed by the customer. These costs eat into revenues and negatively impact a merchant's chargeback ratio. This is especially problematic because if a merchant exceeds 1% of transactions as chargebacks, their merchant account can be shut down. So chargebacks aren't just a financial hit but also threaten a merchant's ability to continue accepting credit cards entirely. Considering the severe repercussions, merchants must understand and mitigate risks around potential chargebacks.

Chargeback deflection empowers merchants by providing additional transaction details to card brands when a customer inquires about a charge, leading to a 20% reduction in chargebacks on average. The software integrates with the card network in real time. So if a cardholder questions a charge, extra information feeds directly to the bank, clarifying details about the purchase. This often resolves confusion before the actual chargeback occurs. Merchants can also set automatic refund policies within chargeback deflection. If a transaction meets defined criteria - for example, under a specified dollar amount - the system can instantly refund the purchase, avoiding chargebacks entirely should the cardholder proceed and dispute the charge. Along with mitigating chargebacks in real-time, chargeback deflection analyzes transaction data to detect patterns contributing to disputes. This intelligence helps merchants make data-backed decisions to prevent further chargebacks going forward. By identifying fraudulent purchases, the software also reduces financial losses.

Insurance: Your Safety Net

While chargeback deflection can prevent revenue loss from chargebacks, or mitigate the damage, chargeback insurance provides the merchant the ability to submit claims for certain chargeback categories for reimbursement.  In addition, Chargeback Insurance may be bundled with cyber and breach protection giving financial security when the unexpected happens. It's a key part of your risk management. In short, insurance gives you a safety net to recover from unforeseen catastrophes. For a responsible business, it's essential.

Chargeback protection insurance is essential for businesses that process card-present payments, whether by swiping, chip/EMV technology, or contactless tapping, as it serves as a safeguard against the financial repercussions of chargebacks initiated by customers. This type of insurance helps businesses recoup the funds lost due to chargebacks, which typically occur when customers dispute a transaction with their credit card company. Scenarios, where chargeback protection insurance proves beneficial, include instances of fraudulent transactions, where the business may be held liable for unauthorized purchases. Additionally, it provides coverage in cases of customer dissatisfaction or disputes over product quality, delivery issues, or discrepancies between the product received and what was promised. By mitigating the financial impact of chargebacks, this insurance allows businesses to focus on their operations without being unduly burdened by the potential financial setbacks associated with disputed transactions.   

In the laundry industry, chargeback protection insurance is key for businesses that use card-present technology and transactions. Consider a scenario where a customer places an in-person order and pays via credit card for premium dry cleaning services, but later initiates a chargeback claiming the EMV chip malfunctioned and the transaction should not have been authorized (EMV Fallback). Alternatively, the customer could claim the merchant did not have the proper EMV-enabled equipment to accept the chip card payment (EMV Liability Shift). Fraud is another risk - a stolen or compromised card could be used for payment, and later result in a chargeback when reported by the legitimate cardholder. In such cases involving EMV disputes or technical errors, the laundry business would be covered by chargeback protection insurance. This insurance ensures financial stability for the laundry business by absorbing the cost of the chargeback, providing reimbursement, and defending against claims resulting from uncertainties with EMV card processing. Without this coverage, EMV-related chargebacks could disproportionately impact the business’ revenues and operations.

Weighing the Return on Investment of Chargeback Deflection and Insurance

Adding chargeback deflection can significantly lower chargeback rates, saving you time and money. It also improves customer experience through proactive communication. Consider their return on investment when weighing the value of chargeback deflection and Insurance. Every chargeback incurred inflicts real costs in lost revenue, administrative efforts, and reputational damage. Chargeback prevention and management companies estimate that preventing a single chargeback can cover the expense of their deflection program for years.

Similarly, one insurance claim resolved can rapidly offset premium payments. If chargebacks and crises regularly impact your finances, these protective tools provide clear savings and a strong ROI. For example, if you currently suffer significant chargeback losses, an effective deflection system could eliminate 90% of that figure, and the annual subscription pays for itself many times over. Likewise, just one disruptive event that triggers a major payout under your insurance could provide a monumental ROI. When unpredictable risks continuously threaten profits, chargeback deflection, and insurance present high value through their ability to mitigate losses and provide financial security. The scale of savings they impart far outweighs the cost of subscription.

Safeguard Your Business with Paystri

As a merchant, you know just how damaging chargebacks can be - lost revenue, headaches, and wasted time and resources. Until now, you've had little defense against customers disputing transactions. There's finally a workable safeguard! Paystri now provides innovative chargeback protection products - saving you money.

Safeguard your hard-earned revenue and manage risk with confidence. Contact Paystri today.