For Monica Eaton-Cardone, “chargebacks” isn’t really a bad word—even though she devotes her professional life to snuffing them out. They’re also what’s driving business at her new company, Chargebacks911, where she is a co-founder and the chief operating officer.
As a former retailer of beauty products and assorted other items, Eaton-Cardone spent years dealing with chargebacks, and not always successfully—at least not at first. “We made lots of mistakes,” she recalls of her retailing days. “Then we thought we had finally ironed out all the bugs of online retailing and reached success, but we weren’t educated about chargebacks.”
That naiveté, she says, led to a too-high chargeback rate—or the percentage of sales transactions that credit card companies charged back to her account after customers denied making an online purchase. That poor chargeback performanceresulted in restrictions on her ability to process credit card transactions.
So Eaton-Cardone and her partners learned how to prevent chargebacks—such as by informing customers of their option to call a retailer to process a return and/or a refund, rather than contacting a payment card issuer to dispute or cancel a card transaction. And they learned how to challenge chargebacks already processed, such as by showing card issuers a recorded online session of a customer checking out on a retailer’s web site.
“We developed chargeback management processes, and then banks started contacting us to help other merchants reduce chargebacks,” Eaton-Cardone says.
In September 2012, she launched Chargebacks911 in Clearwater, FL, from where the firm serves about 100 retail clients, Eaton-Cardone says.
For a monthly fee starting at about $500, Chargebacks911 will intervene between a client retailer and its customers and payment card banks in attempts to either prevent a chargeback that a consumer is about to file, or reverse a chargeback that has already been processed. Eaton-Cardone contends that a significant percentage of chargebacks are related to what she calls “friendly fraud”, by otherwise legitimate consumers, as opposed to fraud committed by criminals. An example would be a retailer’s regular customer seeking to get a refund for an unwanted online purchases by contacting a credit card bank and asking that her payment be reversed. Indeed, a recent study by Javelin Strategy & Research on behalf of LexisNexis, a provider of risk-management software and services, found that 18% of fraud losses cited by merchants were related to such actions by consumers. The study was based on a survey conducted in May 2013.
In such cases, Chargebacks911 will attempt to contact the customer to explain that filing a chargeback can result in a fine for the retailer and possibly restrict its future ability to accept payment card transactions. “Too many customers see the chargeback process as an easier or faster alternative to contacting a merchant for a refund,” Eaton-Cardone says. “There is an overwhelming belief among consumers that there are no consequences for the merchant to filing a chargeback.”
In a March 2013 survey of 200 randomly selected retailers reached via phone and e-mail, Chargebacks911 found that fewer than 40 of them, or less than 20%, had processes in place to dispute chargebacks. “In effect, merchants are endorsing the chargeback process,” Eaton-Cardone says.
To help its clients manage chargebacks, Chargebacks911 sets up connections with a retailer’s customer relationship management system and its payment card banks. If it receives an alert that a retailer’s customer has contacted a retailer’s bank about filing a chargeback, Chargebacks911 will attempt to contact the customer with contact information from the retailer’s customer history database.
In one recent case, she says, a client doing about $1 million a month in online sales retained Chargebacks911 for help in disputing chargebacks after being told by its card processor not to waste time fighting chargebacks. The retailer, which sells recurring subscriptions to shipments of skin care products and nutritional supplements, has won about 84% of its chargeback cases in the past several weeks for a recouped value of about $62,000, Eaton-Cardone says.
Another client, which sells digital products through subscriptions, had lost its ability to accept payment card transactions through three payment processors because his chargeback rate had surpassed 1% of transactions. Since he started to challenge chargebacks over the past six months, the retailer has won about 70% of chargeback cases and boosted his business by 300% after re-activating his lost payment processing accounts, Eaton-Cardone says.
Chargebacks911’s clients range in size from web retailers with about ten chargebacks and $30,000 in sales per month to retailers with thousands of chargebacks and a few million dollars in sales per month, she says.
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