AI as the Future of Chargeback Prevention

Businesses are no strangers to chargebacks and financial disputes. With so many transactions coming in and out, there will always be some percentage of unhappy customers and fraudsters trying to get refunds.

Parties that have no experience as merchants might not realize that refunds come with additional charges that amount to great financial burdens once they accumulate over a given year.

In every industry, AI tools offer revolutionary solutions that almost seem too good to be true. For merchants, artificial intelligence is the future of chargeback prevention, with capabilities to make dispute resolution less labor intensive.

Today, all it takes is AI to manage chargeback data, employ fraud detection and fraud prevention, and run predictive algorithms that result in less headaches and higher revenue.

Table of Contents

• The Burden of Chargebacks

• AI Solutions to Chargeback Problems in eCommerce

• How AI Chargeback Prevention Works

• Conclusion

• FAQ

The Burden of Chargebacks

As the Clearly Payments graph below demonstrates, the current rate of chargebacks varies by industry, with 1.02% in education and .52% for eCommerce businesses.

With chargeback dispute resolution requiring a lot of time, labor, and cost, it’s sometimes more financially viable simply to take the loss.

With the right AI system, retailers can now enter disputes with less overhead and labor, allowing them to manage transaction data and monitor fraudulent activities all with one tool instead of a whole team.

AI Solutions to Chargeback Problems in eCommerce

For every element that makes eCommerce disputes uncomfortable, AI presents a solution that makes the process less problematic.

• Data Management and Analysis: A good AI algorithm leverages your datasets into a manageable system that can be used to create reports about risk assessment, incidence rate, customer experience, and more. Without AI, sifting through vast amounts of data takes so much time and labor, it makes entering disputes financially unviable.

• Imperfect Decision-Making: Humans often make the wrong decision when determining whether a chargeback is legitimate or a fraudster. Furthermore, with the amount of different scams currently at play, AI can analyze all your fraudulent transactions and make informed decisions on whether you’re dealing with first-party fraud, payment fraud, friendly fraud, bots, card schemes and more.

• Predicting Fraud: Using AI for risk management means preventing future instances of fraud by addressing your business’ vulnerabilities, not just streamlining the dispute process.

• Dispute Resolution: Submitting evidence to the issuing bank of the chargeback has never been easier than with AI tools.

Below is a Kount graph of chargeback win rates varying by industry:

As these statistics come from reports prior to the widespread integration of generative AI tools for chargebacks, it would stand to reason that after these tools become everywhere, the win rates would increase for businesses.

How AI Chargeback Prevention Works

Different dispute prevention tools implement different processes, however none are as simple, powerful and user-friendly as Chargeback.io.

• The very moment a customer contacts their bank to dispute a transaction, the AI gets to work.

• The AI receives a notification from the issuing bank then sends you a notification about the dispute 24 hours before it becomes a chargeback.

• You are given the choice to automatically or manually refund the payment, or to dispute it.

• By choosing to refund the payment, you avoid the extra fees that come with chargebacks.

That simply, you can relieve your business from the unnecessary financial burden of chargebacks.

Conclusion

With the right AI tools, the process of resolving disputes and issuing refunds is so easy, it becomes a risk not to employ them. Less labor and overhead with tools that manage all your datasets, from transactions to risks, is the future of dispute resolution.

Never be the victim of fraud again. AI chargeback tools streamline your workflow and resolve disputes with bigger, better wins.