A Chargeback Management Program

Bruce Decker

October 1 is just around the corner and unless you’ve been living under a rock for the last few months, you know that IPSPs are going to start enforcing new chargeback limits for Visa transactions – 1% for domestic transactions and 2% for international. Both were dropped from 2.5% previously. For domestic transactions, that’s a decrease of 60% and for international, a decrease of 20%. These new regulations were announced on July 1, giving companies just three months to drastically reduce fraud levels on their websites.

If you’ve been able to develop a system in three months to definitively reduce your fraud, congratulations. If nothing has been done, that’s a different picture – your IPSP will be contacting you. They know which merchants are not in compliance. The good news is that it isn’t too late. You can still put a chargeback management program in place. AdultRep is also available to help your business take the needed steps.

Scrub Your Sign-Ups Intelligently
If you are using a merchant account, you are going to have more control and more flexibility over your transaction scrubbing. Remember, just because a customer wants to sign-up doesn’t mean you should necessarily accept the sale. We all reject signups based on AVS declines, but that should not be your only method of scrubbing. Most importantly, it does nothing to help you with international transactions.

At AdultRep, we help our clients by scrubbing international transactions based on the IP address of the surfer and the issuer of his credit card. The first 6 digits of a Visa or MasterCard will identify the country and bank the card came from. If someone with an IP address from Uruguay is trying to sign-up with a credit card from the United Kingdom, that’s going to raise red flags.

Nevertheless, it doesn’t make sense to reject these sign-ups outright. A better strategy (one that AdultRep implements for its clients) is to call back the subscriber and ask why there is a discrepancy. In many cases, we’ve found legitimate customers who were traveling at the time of their signup and were attempting to subscribe from a cybercafe or a hotel outside their home country. In these cases, we simply ask the customer to fax us a signed authorization form that authorizes the charges. If you operate a compelling site, customers are willing to do this for you.

Once we have the form, we allow the signup to go through. We’ve also protected our client against any future chargeback by this cardholder because we have the signed authorization on-file. This may sound like a lot of work – it is, but it must be done. If you scrub too hard, you’ll never get any legitimate business. If you don’t scrub hard enough, you’ll be a magnet for fraud. The good news is that you don’t have to work alone. Find out what your billing company can do for you. If they can’t scrub transactions the way you want or are not willing to handle special cases like the one described above, ask AdultRep to help out. We recognize that not every situation can be scrubbed through an automated system and we’re not afraid of giving your customers personal attention when they try to sign-up to your site.

Start With Good Customer Service From Day One
After you make your sale, the first step in managing your chargebacks is not getting them in the first place. You do this by providing your customers with excellent customer service. Phone calls should be answered, e-mails should be returned promptly, and customers should be able to chat with a site representative from a live help button right there on the website. Leaving all of this to your billing company just isn’t enough. They will assist your customer with billing issues, but they aren’t going to help your customers get that streaming video working. You need to offer customers a way to get in touch with someone who will manage their problem from start to finish – someone to care about their issue.

If you’re going to take this responsibility yourself, make sure you stay on top of it. It is easy to ignore the problems of a few customers when you’re focused on getting a new site online or increasing your affiliate count. If that’s the case, either hire someone to take care of your customer service or outsource it to a company like AdultRep.

Keep an Eye On Your Affiliates
If you’re running a revenue sharing program, you’re likely already sharing the costs of chargebacks with your affiliates. Now, more than ever, it is important to keep a watchful eye on your affiliates and the traffic they are sending you. In our experience, chargebacks seem to follow the 80/20 rule – 20% of your affiliates will send 80% of your chargebacks. Consider whether you wish to continue to do business with those affiliates.

Perhaps it is also time to consider some fundamental changes to your program. In addition to having a higher payout level for affiliates who send the most traffic, consider also having a higher payrate for affiliates who send the highest quality traffic. If your program naturally rewards quality affiliates and punishes ones that send chargebacks, you’ll find problem affiliates leaving and quality affiliates sending more traffic to your program – where they are rewarded for their efforts.

AdultRep can monitor your affiliates’ chargebacks, but we can also keep an eye on your affiliates’ websites for you – looking for potential problems before they turn into chargebacks. We can make sure your affiliates are promoting your site, your brand, and your content in the way you want.

Manage Chargebacks After You Receive Them
In addition to efforts designed to avoid chargebacks in the first place, make sure you manage the chargeback process after they arrive. Work with your merchant bank and call customers to try and get the chargeback reversed. Many of AdultRep’s clients have elected to use our process, which we call “Chargeback Combat”. We focus on obtaining cardholder signatures authorizing the charges after the chargeback has occurred. A variety of methods are used and after authorization is obtained, we send it to the merchant bank and ask for re-presentment of the chargeback.

No matter what methods you end up using, make sure that you do something. With the October 1 compliance deadline just a day away, your company should be gearing up and getting ready to start with a chargeback management program. If you haven’t started planning or found that you don’t have the capabilities to manage your chargebacks internally, AdultRep is ready to assist.

Bruce Decker is Director of Marketing and Public Relations for AdultRep. Decker has worked in the adult industry for over 7 years and focuses on helping AdultRep clients meet the ever-increasing demands of their customers. For more information on AdultRep or its services, please visit or contact by e-mail.

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