Most Independent Sales Organizations (ISOs) are encouraged when they see their credit card processing volume increase. More volume means more revenue, goes the standard thinking. Unfortunately, with increased processing volume comes increased chargeback risk.
In the most basic terms, a chargeback occurs when a credit cardholder and a merchant disagree about a charge to the cardholder’s account. One side (usually the merchant) believes the charge is valid and the other does not. The reason might be as innocent as a mistaken duplicate charge or as suspicious as theft or forgery.
Regardless of how or why the chargeback came about, defending cardholder disputes costs merchants and acquirers time, labor and money. ISOs and acquirers spend millions of dollars every year on chargebacks. Even if the merchant and acquirer end up “winning,” they’ve still expended valuable resources defending and processing the dispute.
In response, more and more ISOs and banks choose to outsource this piece of their business to third-party payment service providers. They believe it is in their best interest to leave dispute processing to dedicated professionals with years of expertise in this field. Also, many acquirers find that outsourcing this piece of the business frees up time and resources so they are able to focus on serving their merchants rather than jumping through hoops to meet required deadlines, update dispute processing technology or train staff on the latest card association rules.
When considering outsourcing, look for a highly experienced partner with a proven ability to quickly adjust capacity, scaling up or down as the market fluctuates, and utilize Internet-based systems. This allows for additional cost reductions through the use of trusted partners operating in an off-shore capacity, typically within less expensive markets. Ultimately, the significant cost savings will more than justify the decision.
Andrew Benjamin
Director, Business Development for TSYS Managed Services
Andrew Benjamin is the Director of Business Development for TSYS Managed Services. He is responsible for developing dispute and chargeback service relationships in the U.S. and international markets, as well as new client integration. He also serves in a consultant capacity for ISO’s, acquirers, and banks, evaluating operational opportunities.
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