How do pre-chargeback alerts reduce fraud costs for merchants?

Pre-chargeback alerts surface claims raised by issuers before they become chargebacks. That gives the merchant a window to refund the transaction instead of absorbing a chargeback and its fee, and it keeps chargeback ratios inside scheme thresholds. For the operator, the alerts are useful when they can be matched to the original transaction, whichever provider processed it.

A window before the chargeback

When a cardholder reports a transaction as fraudulent or disputes it, the issuer can send an alert through Verifi or Ethoca before filing a chargeback. The merchant then has a short window, 72 hours for CDRN, to refund the transaction. If it does, the claim closes, no chargeback is filed, no fee is charged, and the dispute does not enter the monitoring ratios.

What it saves

• The chargeback fee and the internal cost of handling a dispute, about $128 on average.
• The weight of the dispute in Visa VAMP and Mastercard ratios, which carry fines and can end in termination.
• Shipping the goods, when the alert arrives before fulfillment.

What makes alerts work

Matching. An alert carries card and amount data, not the merchant's transaction ID. If the operator processes through several providers, the alert has to be matched to the right transaction whichever provider handled it, then refunded on that transaction, within the window. On NORBr, alerts are matched automatically where the payment was processed, flagged when they cannot be, and refunded with the reason recorded on the transaction. Operators enable the service per merchant and see, in reporting, how many claims never became chargebacks.