A little under a year ago in this publication, I wrote about my company’s plans to integrate with Visa’s Rapid Dispute Resolution, and explained in detail how RDR works to reduce chargebacks. Now, approximately 11 months later, we are happy to report it’s working as intended.
Chargeback. The word is enough to send chills up the spine of any merchant that accepts card payments. High chargeback numbers are detrimental to any business, and it is hard to fight the issue on your own. Fortunately, RDR can significantly reduce unwanted chargebacks and prevent a merchant’s chargeback ratio from going overboard.
Research shows that positive interactions with a merchant mean that a customer will be more likely to purchase products or services from that same business in the future.
Successful business owners tend to do all they can to follow the old axiom, “The customer is always right.” However, there are times when a customer cannot be appeased, and their credit card company gets a request to file a chargeback. Those of you who don’t know what a chargeback is should consider yourselves lucky. For everyone else: after reading this article, you will be familiar with how Rapid Dispute Resolution can keep those pesky chargebacks to a minimum.
RDR is a chargeback prevention tool for merchants that acts in the pre-dispute stage. RDR automates the decision-making process with no action required from the seller aside from defining the initial rules. Upon activating RDR, the acquirer will need to reclassify data to distinguish RDR transactions from actual disputes, so that the resolved transactions are not identified as disputes in statements, invoices, billing systems, etc. Merchants have quite a bit of leeway in determining which disputes to automatically refund through RDR. They can utilize anything from transaction values to transaction dates to chargeback reason codes.
Apart from reducing the number of conflicts, an RDR-resolved transaction also will not have a negative impact on the seller’s chargeback ratio and will consequently reduce the number of disputes.
The RDR program serves as a built-in insurance policy to help merchants avoid ending up on the Mastercard Alert to Control High-Risk Merchants Terminated Merchant File, Mastercard’s global blackball registry. Once on the MATCH TMF list, it is nearly impossible to get removed from it, as only the organization that put you on the list can remove you. Getting put on the TMF means you will be barred from accepting credit cards ever again.
Obviously, you want to do everything you can to stay off the TMF, including properly managing your chargebacks. And what better way to do that than with a set-it-and-forget-it solution like RDR? Visa’s current chargeback threshold before taking action against a merchant is a .9% ratio and 100 chargebacks per month. If you take these numbers into consideration, RDR is especially beneficial for high-risk businesses. If you are close to breaching the Visa chargeback threshold, RDR will be an extremely useful tool to keep your ratios in check.
We have seen a dramatic decrease in chargebacks across the board for clients that utilize RDR. In one instance, we had a merchant in pretty serious trouble at almost 99 chargebacks and 6% chargeback-to-sales ratio consistently month-over-month. RDR has lowered their ratio to less than 1% consistently month-over-month, and it has stayed that way to this day. Having this system in place to intercept chargebacks before they happen offers a remarkable benefit to business owners.
The best part of RDR is that it is now a real-world proven technology, with real results, that has tangible effects on chargebacks with quantifiable benefits to businesses that may run a little hot each month. Every business type, not just high-risk businesses that may be facing chargeback difficulties, could see a very real benefit from deploying RDR, which can be done in as few as 30 days from enrollment. One of the biggest upsides of RDR is that it improves the overall customer experience and satisfaction because the cardholder is given a decision in real time. Research shows that positive interactions with a merchant mean that a customer will be more likely to purchase products or services from that same business in the future.
Here’s the recap: RDR works by intercepting chargebacks and issuing refunds to the cardholders in real time based on your own parameters, which benefits your business by keeping chargeback ratios under the acceptable card brand ratios. Keeping those ratios down allows your business to continue accepting credit card payments. Now that it’s been in production for the better part of 11 months, we have seen RDR actually working and benefiting businesses of all types; it’s not just a gimmick!
Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.
