Executive Insight: For Today’s Businesses, Beating Chargebacks Is A Team Sport

14.05.2024 16:00

Twice.com

For today’s enterprises, “friendly fraud” and illegitimate credit-card chargebacks are a serious problem: at least 40% of businesses lose 1% of their total revenues to bogus chargebacks, and well over half say they see chargeback rates climb year-on-year. Putting systems in place to mitigate these revenue losses can be tough. However, excessive scrutiny of individual transactions can sour customer relationships while collecting data and managing disputes at scale create enormous logistical headaches for internal teams.

To figure out how successful organizations handle these challenges, I headed to Payments MAGnified in Dallas to host a panel with Best Buy execs Jen Renner, Associate Manager for eCommerce Fraud Risk, and Ryan O’Connor, Senior Finance Manager. They had some great insights about the need for cross-team collaboration and strong partnerships to drive effective chargeback mitigation, and I wanted to take this opportunity to share a few of their most important points with a broader audience.

Chargeback mitigation is a balancing act. It’s tempting to think of chargebacks as a narrow or esoteric piece of the payments landscape — but nothing could be further from the truth. It’s not just the financial losses, which can reach $5 million a year for a business with $500M in annual sales. It’s also the fact that handling chargebacks effectively requires input from a wide range of internal stakeholders, including in-house fraud mitigation teams, operations and customer support divisions, and finance and IT leaders. An effective mitigation strategy has to help all those different stakeholders come together — and it has to do so in a way that balances the need to reduce chargebacks with the need to provide delightful and frictionless experiences for customers. “You need to ensure that all those teams understand that there will always be some risks,” said Renner. “The goal should be to find common ground where teams can minimize risk while still providing a super-seamless experience for customers.”
Don’t downplay complexity. “It would be lovely if organizations could put a single simple strategy in place to manage chargeback fraud,” O’Connor said, but the reality is that large retail operations are incredibly complex — and organizations need to acknowledge and plan for that complexity as part of their mitigation efforts. A fraud mitigation function has to address all the different ways your company handles transactions, deals with shipping and fulfillment, and engages and serves customers — because oversimplifying your mitigation strategy by glossing over any of those complexities can create serious vulnerabilities. “Fraudsters are going to attack, and they’re going to find the path of least resistance,” O’Connor added. “A one-size-fits-all strategy doesn’t really work well.”
Roenen Ben Ami, co-founder and Chief Risk Officer of Justt.ai

Be proactive, not reactive. A chargeback response is necessarily reactive because it’s inherently a response to a specific thing that’s happened to your business, Renner said. Because of that, though, it’s all the more important to get ahead of the curve in any way you can and find ways to proactively optimize systems and prepare to manage disputes effectively. That, in turn, often involves fostering collaboration. Collecting and analyzing data, for instance, can be a useful way to identify risks or flag unusual customer behavior — but it’s only truly effective if teams know in advance who their findings need to be shared with, and what action needs to be taken across the organization as a result. “We always try to have communication and find those rare points where we can be proactive in our work,” Renner said.
Collaboration is cultural. Ensuring effective and timely collaboration in complex organizations requires more than just a solid fraud mitigation strategy — it requires a rock-solid organizational culture. That’s especially true in the current workplace, where some teams are remote, and business processes are evolving fast in new directions, Renner says. Best Buy’s anti-fraud teams hold regular check-ins with key leaders from across the organization, and also with third-party fraud mitigation partners, to ensure that communication channels stay open and that everyone is aligned about the action that’s needed. “Instead of letting ourselves become separated, we’ve found a way to come together and really feel like one cohesive team,” Renner said.
Use infrastructure to empower people. An effective chargeback mitigation function uses technology to empower people to act independently and collaborate seamlessly — and also to reduce the overhead required to effectively address any given dispute. That requires data pipelines to ensure the right insights are reaching the right teams in real time and also advanced automation features to ensure that disputes are managed quickly and that mitigation teams aren’t overwhelmed by increasing chargeback volume. O’Connor emphasizes the importance of staying agile, and building out infrastructure without sacrificing flexibility. It might make sense to dial up automated or outsourced support during high-volume periods such as the holiday or post-holiday season, for instance, while relying on a core in-house team of mitigation experts during quieter periods.

For me, the big takeaway from Payments MAGnified was the realization that even for huge and highly successful companies like Best Buy, chargebacks are a complex and multifaceted problem. No matter how big your organization is or how deep your pockets are, you can’t simply go out and buy an off-the-shelf solution to eliminate chargeback risks. Instead, you need to put in the work, build a strong culture of collaboration across the organization, and team with trusted third-party vendors to build the flexible and effective infrastructure needed to support your company’s evolving needs.

That might sound daunting. But it’s actually good news — because it means that the secret to managing chargebacks effectively isn’t simply scale or resources. There’s no size, in fact, at which it becomes possible to manage chargebacks effectively simply as a function of the size of your organization because the challenges of managing chargebacks grow — perhaps exponentially — along with the complexity and size of your organization.

Instead, for businesses of all sizes, the path to effective chargeback mitigation depends on building systems — cultural, organizational, and technological — that enable more engaged, seamless, and strategic collaboration and decision-making by stakeholders at all levels. Getting that right isn’t easy, of course. But it’s something every organization has the capability to achieve if they’re thoughtful about the way they approach chargeback mitigation, and work creatively and proactively to build out the teams, partnerships, and infrastructure they need to succeed.

About the Author
Roenen Ben Ami is the co-founder and Chief Risk Officer of Justt.ai. Justt is a smart technology solution to the unjust and complex system for resolving credit card payment disputes. You earned it. Now keep it.