Today, accepting payments online is easier than ever. Unfortunately, getting hit with chargeback requests is also a fact of life for any company that accepts payments in a CNP (card not present) scenario.
It doesn’t have to be, though – not if you deploy the right chargeback management software.
What Is Chargeback Management Software?
Chargeback management software helps companies that accept online card payments reduce the risk of transaction fraud. This is done by monitoring, logging, and flagging transaction data. Certain software may also offer chargeback dispute resolution tools.
How Does Chargeback Management Software Work?
Chargeback management software works by letting your company do some or all of the following:
- Monitor chargeback rates: Your chargeback rate should ideally never go above 1% of all processed transactions. If it does, you may be classified as high risk, charged a higher card transaction fee, or even get blacklisted by card networks.
- Prevent chargebacks: By monitoring payment and user data, you should be able to flag and stop suspicious transactions. This is usually done by feeding the data through risk rules, which output a risk score. You can then accept, refuse, or review the payment.
- Investigate payments: All the payment and user data should be kept in history logs, which you can investigate to understand how chargebacks happen at your company.
- Resolve chargeback disputes: If you enter the chargeback dispute process, your chargeback management software should provide you with all the evidence you need via Excel sheets, dispute templates, dispute codes, etc.
- Review chargeback rules: Finally, a key part of managing chargebacks is the ability to label information from past chargeback cases. This can help train your system to avoid false positives and false negatives, thus improving results.
You can read more about chargeback fraud prevention and detection in our complete guide.
How to Choose Chargeback Management Software
Like with any other kind of third-party software, there are key points to consider when it comes to chargeback management:
- Features: Double-check that the software can do everything you need it to. Some solutions are better suited to fraud management, while others are better for managing disputes, for instance.
- Integration: How you deploy the software could play a huge role in your decision. See more about the different types of integrations available below.
- Support: Does the vendor offer extra help to get started? Is this support free or paid?
- Pricing: There tend to be two schools of thought here. Some vendors offer a flat monthly fee with a chargeback guarantee. Others charge a small percentage of every checked transaction. There are benefits to each model, but there is also a potential conflict of interest in chargeback guarantees. You can read more about micro fees vs the chargeback guarantee model here.
Different Types of Chargeback Management Solutions
A key point to consider before diving into the right features is how exactly to manage your chargeback management solution. Here are a few options.
Software (On-Site or SaaS)
A growing number of companies choose to outsource their chargeback management platform to a third-party software company and then manage it themselves. The tool may be cloud-based or installed on-premise, but the idea is that the development and features of the software are outsourced, and you provide the manpower to run it.
- Flexibility and adjustability
- Better control over the whole system
- You must employ chargeback and payments experts
- Automation still needs to be supervised
Some chargeback management companies go the extra mile by selling you both the tools and the expertise. With this option, you are essentially outsourcing an entire chargeback management team.
- Leverage experience from professionals
- Requires less workforce
- Significantly more expensive than SaaS
- Less control over how chargebacks are solved or prevented
Finally, some companies decide that neither SaaS nor fully-managed fits their business model, so they opt for a combination of the two. There is always the option to purchase the chargeback management tools you can understand and outsource specific tasks, such as dispute resolution, to another service.
- Maximum control and flexibility
- Must carefully plan integration and coordination across systems
- The more services you purchase, the more expensive it will be
The 6 Best Chargeback Management Software Tools
Disclaimer: Everything written about the companies mentioned in this article was gleaned from online research, including user reviews. We did not have time to manually test all the tools. However, we ensured the information was correct as of Fall 2021. Feel free to contact us to request an update/correction.
SEON – Best for Transaction Fraud Prevention
A key point to understand with chargebacks is that you usually have different tools for prevention and resolution. SEON is one of the best solutions for preventing chargebacks before they happen.
This is all done by giving you the most complete transaction and user behavior monitoring options available, including:
- Data enrichment modules: You can learn a lot about whether your users are legitimate buyers or not by looking at red flags raised by a fake email address, phone number, or a lack of social media presence, for instance.
- Flag suspicious payments: Gain all the data intelligence you need without asking for extra verification. You can request 3DS PSD2 exemption, and process more payments without adding friction to the buyer’s journey.
- Better control over transactions: SEON’s powerful risk scoring lets you set thresholds manually and use custom rules to instantly approve, deny, or manually review transactions.
- BIN check: Learn when you’re dealing with valid cards, prepaid cards or gift cards thanks to our BIN checks. Only accept the cards you deem safe enough, to avoid processing fraudulent purchases.
“We now have a constant source of truth for card BINs. If you go and type a card BIN on the internet, you’ll get 50 different results because the lists are all over the place. But now, with SEON, we can be consistent when linking cards across the team.”
Rick Hiltbrunner, Senior Manager of Fraud Operations at Patreon
- Check social signals: SEON aggregates user information from 35+ online platforms and social networks, letting you spot when you’re dealing with suspicious customers.
- Custom rules: Give your payment team complete control over approved and rejected rules to match your risk appetite.
- Fast and frictionless: Integrate via APIs for split-second decisions.
- Transparent pricing: Few chargeback management tools give you a free 30-day trial and a true cancel-anytime SaaS model.
- No chargeback resolution: While you can export all the transaction and customer info to resolve chargebacks and to prove friendly fraud, you don’t get specific tools for resolution.
- Starts at $99 per month.
Sift – Controlling Payment Fraud at Every Level
Sift is another complete fraud prevention solution that happens to offer a chargeback module. The good news is that the module comes from the acquisition of Chargeback.com, the pioneer in real-time dispute resolution for merchants, so you get both prevention and resolution in one neat package.
While Sift offers custom rules, some customers report that the blackbox AI (which takes over the fine-tuning when accepting or declining transactions) can be perhaps too opaque. For small businesses, this can be an advantage: You won’t have to think too hard about how to tailor Sift to your preference. Other companies, however, might enjoy having a bit more control.
- Chargeback-specific module: Sift’s acquisition of the company Chargeback.com means the platform has a pre-built connector to reduce chargebacks.
- Works for other fraud attacks: Sift offers general fraud protection tools that go beyond chargeback management, such as KYC and trust and safety.
- Blackbox AI: When it comes to AI suggestions and recommended rules, it’s not always easy to know why the transactions are blocked, due to the opaque nature of the blackbox system.
- Available upon request.
Chargebacks911 – Resolution Templates and Solutions
When it comes to being prepared for a post-chargeback dispute, Chargebacks911 is not only one of your best online resources, but also a solid software solution. The company offers all the tools you need to collect evidence, submit it in the context of a dispute, and sift through the data for your own reporting.
You’ll also get a single source for all your resolution templates, chargeback codes, and the kind of evidence you need to submit.
- Chargeback-specific resources: Chargebacks911 offers dispute resolution letter templates, chargeback reason codes, and much more.
- Precise reporting: You get granular information including recon reports, win-loss verdict reports, and more.
- Not suitable for prevention: A great tool to fight a chargeback. Not so great to prevent it from happening in the first place.
- Available upon request.
Verifi – A Visa Solution for Merchants and Issuers
One of the key offerings of Verifi is its trademarked Cardholder Dispute Resolution Network. The idea is to act as an intermediary between merchants and issuers, allowing you to close the loop during the chargeback process, resolving the issue directly with the consumer.
According to the company, it accelerates the average resolution time to an average of 24 hours. The most interesting part, in fact, is that it is suitable both for merchants and issuers. So yes, it’s mainly for resolution rather than prevention, but this innovative approach can bring peace of mind to retailers who face a bottleneck in that department – especially when you know that Visa is involved.
- Specific chargeback tools for issuers: Verifi offers access to their Cardholder Dispute Resolution Network, designed to connect issuers directly with 15,000 merchants to resolve disputes.
- Visa-powered solution: You can trust that the card network has every incentive to help you reduce chargebacks.
- Limited prevention features: Verifi relies on shared blacklists from Visa’s network to block suspicious transactions. The data may quickly become stale and result in false positives.
- Available upon request.
ChargebackGurus – Managed Chargeback Prevention and Resolution
With more than 15 years of experience in the online payment industry, ChargebackGurus understand how chargebacks happen, how to prevent them and, interestingly, how to recover lost revenue from past cases.
ChargebackGurus makes bold claims – namely that you could win around 70% of your chargeback disputes and thwart 50% of friendly fraud chargeback attempts. How? Well, the prevention side is mostly covered by chargeback alerts based on your own risk rules.
The recovery stage is perhaps more unique, as it is managed by experts who monitor and review orders in real-time. You will need to give the company access to your settlements, fees, and reserves, but it may be more than worth it for high-risk companies that have to reduce chargeback rates at any cost.
- Managed chargeback solution: You’ll pay for the tools but also for the team’s expertise in monitoring and fighting chargebacks on your behalf.
- Root-cause analyzer: ChargebackGurus’ data analysis tool gathers 40+ data points to understand why chargebacks happen.
- Win-loss analysis: See real-time calculations of your ROI based on won or lost chargeback cases.
- Limited prevention tools: You get transaction alerts, but not much else. It may work to flag obviously fraudulent chargeback attempts, but you might miss out by not looking at alternative user and behavior data.
- Not available online.
Riskified – Chargeback Guarantee for Ecommerce
Founded in Tel Aviv in 2013, Riskified was initially designed to improve ecommerce security for online vendors. As the challenges surrounding CNP payments changed, so did Riskified’s business model. The company now protects merchants by focusing on fraud prevention – especially in the context of flagging bad payments that may lead to chargebacks.
A key offering of Riskified is the company’s chargeback guarantee model. This may be a benefit for smaller online businesses that are strictly focused on reducing their chargeback rate. However, it may also be seen as a strong incentive to be too strict with suspicious payments, which could lead to higher rates of false positives and churn, both of which harm the merchant by increasing the customer insult rate.
- History of ecommerce protection: Riskified is a fraud prevention company that has always been laser-focused on helping online stores.
- Chargeback guarantee model: Great if you’re only focused on lowering your chargeback rates to remain in card networks’ good books.
- Chargeback guarantee model: Yes, this model is also a shortcoming if you want more control over which transactions get accepted or rejected, and want to avoid false positives.
- Opaque pricing: It’s very hard to know how much you’ll end up paying to use Riskified, unless you get in touch with their sales team.
- Not available online.
Conclusion – Choosing the Best Chargeback Management Software
Chargeback management software is designed to protect your business from fraud, process more payments with peace of mind, and ensure you are protected in case of a dispute.
However, no two companies offer exactly the same features. We hope this post clears things up when you’re looking for a way to reduce chargeback rates, but also to understand what causes them and how to stop them from happening in the first place.
Chargeback Management FAQs
What causes chargebacks?
Chargebacks happen when customers claim they never made an online purchase they were charged. They could, for example, say that someone else used their credit card to do so, or that they never received the item.
How do I manage chargebacks?
Chargebacks must be managed by monitoring online payment data, creating alerts and risk rules to flag suspicious transactions, and keeping all the user and card information at hand in order to dispute a chargeback with evidence.
How can chargeback management software help me?
Chargeback management software lets you aggregate all the transaction and user data you may need to automatically flag suspicious transactions and/or to present evidence during the chargeback dispute process.
What features are important in chargeback management software?
Chargeback management software should give you access to as much transaction and customer information as possible. The information should give you the confidence to make an informed decision about blocking or accepting a payment.
Are chargebacks illegal?
No. Chargebacks are a form of customer protection against payment fraud. However, cardholders who claim chargebacks under false pretenses are indeed committing friendly fraud, which is illegal.