How to fight chargebacks & write winning representment letters with better recordkeeping

If you're selling nearly any service or product online, there's probably a better-than-not chance that you've dealt with chargebacks, or you're going to soon. A 2012 JP Morgan survey on the subject of online payment fraud found that merchants lost over $1.5 BILLION to chargeback disputes in a single year alone.

So what's the key to winning more chargeback disputes with credit card companies? Just like with your legal terms, a hard-copy, third-party produced, tamper-proof record of the transaction is a great way to help reduce the impact of credit card and payment fraud on your online business.

Here's a quick guide for both those well-versed in payment fraud disputes, and those new to the self-service & on-demand economy.  

So, what exactly is a chargeback again?

Chargebacks occur when credit-card holders successfully dispute a charge on their bill with a credit card company or bank. Simply stated, the bank or credit card company will then refund their customer or cancel the charge for the disputed item if they can "prove" that the charge was fradulent or unauthorized. Chargebacks often also occur when customers allege to a credit card company that they haven't been delivered the goods requested or some other part of the promised transaction hasn't been completed. It's a customer protection mechanism -- and erring on the side of customers helps the credit card companies retain more cardholders, rack up interest payments, and make more money. 

But that often leaves merchants holding the bag -- and bearing the costs of the chargebacks. The vast majority of chargebacks occur after the performance of services or the delivery of goods has been made. While most credit card companies have shorter periods to report a claim based on contract, US law gives consumers two full years to file a dispute. That's why this is a multiple-billions-of-dollars problem for companies.

Next question: What does the process of fighting a chargeback look like?

After the consumer files the dispute and it's approved by the credit card company or bank, you'll recieve a notice of the chargeback- something that's legally required for the process to commence. At that point, you as the merchant have two options:

1. Accept responsibility and eat the loss.
2. Submit information to fight the chargeback.

The second option is an option called "representment" -- the opportunity to provide the processsing bank or credit card company information to prove why the transaction wasn't fraudlent or why you as the merchant shouldn't be responsible. For that, you'll need to assemble data and evidence to prove the authenticity of the transaction.

What kind of data do I need to help my case?

All banks and credit card companies are different, but you'll need to assemble two important types of data: proof that the transaction was made & how it was transacted. From our research, we've found that some of the best representment submissions include:

  • Information about the credit card (obviously!)
  • Data stamps with IP addresses that can be cross-referenced with past transactions.
  • Information about any terms or contracts accepted as part of the checkout process.

Lucky for you, PactSafe collects this of information automatically when it's plugged into an e-commerce flow. By implementing PactSafe, you can be creating enforceable contracts of sale that you can provide as pieces of evidence to credit card companies to help prevent costs that are associated with chargebacks. Because PactSafe is completely invisible, it won't disrupt your conversion rates -- which will make your marketing team very happy.

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