Optimising chargeback management is tricky.
Every card network has its own way of doing things.
Both Visa and Mastercard offer services for chargeback prevention, but each service is unique. A noticeable difference exists in automation vs. merchant involvement during the transaction alert process.
Understanding their differences significantly improves your ability to manage potential chargebacks, reduce related costs, and streamline your workflow.
I covered Visa RDR previously.
Today, we’ll look at Mastercard’s Ethoca Alerts service. Then, we’ll compare the two approaches.
Let’s start with Ethoca Alerts.
What are Ethoca Alerts?
Whenever a cardholder disputes a transaction, the issuing bank identifies the disputed transaction and alerts the Ethoca network.
The merchant receives the network notification in near-real-time. The alert provides the merchant with transaction data like the date, amount, and card number (partly obscured for security).
At this point, the merchant can take action. Possible actions include:
- Issuing a refund for a valid transaction.
- Stopping the shipment of goods in cases of fraud or cancellation.
- Contacting the customer directly.
- Provide additional documentation for a legitimate transaction, like proof of delivery or service completion.
- Offer an alternative resolution such as a store credit, replacement, or free service.
Of course, the merchant can also ignore the alert, but this usually results in a chargeback. This defeats the purpose of the system. Ethoca Alerts are intended to reduce or eliminate chargebacks proactively. Chargebacks are costly for everyone and are also subject to fraudulent activity.
What are Ethoca Alert’s Benefits?
The benefits of Ethoca Alerts are reduced chargeback rates, saved revenues, and workflow efficiency. Another benefit is the ability to analyse the alert data to help enhance fraud prevention and improve customer service.
Because Ethoca works with an extensive global network of card issuers and merchants, a wide range of disputes can be handled quickly and effectively.
These are also welcome benefits of Ethoca’s services:
- Alerts are delivered in real-time or near real-time. Prompt action is possible.
- Customer satisfaction is improved. Disputes are resolved quickly and with good customer service support. Loyalty is also improved.
- Operational costs are lowered. As I mentioned, managing chargebacks is tricky. Ethoca Alerts makes managing disputed transactions a direct and immediate process, saving time and money.
- Comprehensive reporting is available from Ethoca. These reports help understand trends and make critical decisions.
- In addition to chargeback prevention, fraud prevention is improved, eliminating potential fraud-based losses.
What’s Ethoca Alerts’ Downside?
Still, Ethoca Alerts is primarily a manual operation the merchant must perform to be effective.
Each alert costs the merchant a fee. These fees can add up quickly, especially if you, the merchant, subscribe to alert systems from multiple card networks.
The result is savings from chargeback losses and fraud prevention but a constant stream of fees for each alert. Competent management of this process is required to make it a tolerable situation.
This is where the comparison of Ethoca Alerts and Visa RDR come into play.
What is Visa RDR?
Visa RDR (Rapid Dispute Resolution) takes a different approach to handling dispute alerts. It’s a more automated system, relieving the merchant of repetitive actions.
Visa RDR, like Ethoca Alerts, is designed to reduce chargebacks and prevent fraud. Understanding how to utilise each service’s strengths is key for optimising your chargeback management strategy.
Let’s compare the two approaches.
Visa RDR and Ethoca Alerts are similar in several ways. Let’s look at those similarities first.
Ethoca Alerts vs. Visa RDR: Similarities
- Both tools help reduce the frequency of chargebacks. Their primary purpose is addressing disputes before they can escalate into chargebacks.
- They provide early dispute notification. Handling a disputed or potentially fraudulent transaction in real- or near real-time is crucial in taking timely action.
- Their services are notably appropriate in dealing with online merchants. Disputes and chargebacks are more common in their card-not-present transactions.
- Both services assist in fraud detection and prevention. Catching fraud early is quite helpful.
- These tools can be integrated into your existing transaction and dispute management workflow. A streamlined process is much more efficient.
Ethoca Alerts vs. Visa RDR: Differences
Ethoca Alerts notify the merchant of disputes. The merchant then takes over and handles the management of that transaction.
Visa RDR is automated based on the rules the merchant sets up in advance. For instance, a merchant can automatically accept chargebacks that fall under a specific dollar amount. Or, they may have certain types of transactions they choose to accept.
Ethoca requires the merchant’s active involvement and decision-making for each alert.
VIsa RDR automates the process, limiting the merchant’s involvement.
Service provider and network
Ethoca Alerts (Mastercard) works across various card networks.
Visa RDR is designed explicitly for transactions on the Visa card network.
Ethoca offers more flexibility. Merchants can decide on the appropriate actions to take on a case-by-case basis.
Visa RDR follows the rules the merchant set up. The rules may not take into account all the various situations that can arise.
Ethoca requires the merchant to issue refunds manually and then notify Ethoca of the refund.
Visa RDR is all handled by the acquiring bank, so a refund is automated.
Nature of the service
Ethoca Alerts focuses on collaboration between card issuers and merchants.
Visa RDR automates dispute resolution within the Visa network with a rule-based system.
Counting lost disputes
Ethoca alerts are issued pre-chargeback. You have the opportunity to refund the payment, thereby avoiding the chargeback completely. Ethoca Alerts do not come through as a dispute at all.
Merchants using Visa RDR will “lose” a dispute, although a refund is automatically given according to the rules. However, these disputes do not count against your dispute rate. You may or may not pay a dispute fee according to your contract, but you are no closer to entering a monitoring program like Visa’s VDMP.
Reducing false positives
Ethoca Alerts rely on notifications from card issuers, including billing descriptors. Matching such disputes to transactions can be error-prone.
Visa RDR does not rely on billing descriptors on statements, so there are fewer false positives or matches. RDR is a more robust system.
How to Manage Chargeback Prevention
Optimising chargeback management involves looking closely at your chargeback prevention process. Finding ways to streamline the process also saves money.
You’ll need to handle potential chargeback situations from multiple card issuers and networks. These networks may all notify you of the same transaction, and each will charge you for it. Duplicate notification fees are a problem for automation to solve.
Our service, ChargebackStop.com, is dedicated to preventing chargebacks. ChargebackStop can reduce your chargebacks by up to 99%.
By integrating into your process and intelligently automating as much as possible, you can manage the entire process from your ChargebackStop dashboard.
All you need to do is point-and-click to tell the system how to respond to whichever card network alerts you of a potential chargeback situation. This integration includes both Ethoca Alerts and Visa RDR, but only as a last resort. Treating these alert systems as a fail-safe means fewer alert fees and more prevented chargebacks.
There must be questions in your mind as to how this all works together. It’s tricky.
Visit ChargebackStop.com/contact-us to reach out for answers to your chargeback challenges.
You can also book a free demo of the ChargebackStop platform.
Visit ChargebackStop.com today.
FAQ: Ethoca Alerts
What are Ethoca Alerts?
Ethoca Alerts is a service provided by Ethoca, a Mastercard company, designed to help merchants and card issuers quickly communicate about and resolve disputed transactions before they escalate into chargebacks.
How do Ethoca Alerts work?
When a cardholder disputes a transaction, their bank sends a notification to Ethoca, then alerts the merchant in real-time. This allows the merchant to take immediate action, such as issuing a refund or stopping shipment, to resolve the dispute.
How are Ethoca Alerts different from Visa's Rapid Dispute Resolution (RDR)?
Ethoca Alerts focuses on early intervention by notifying merchants of disputes that require manual review and action. In contrast, Visa RDR automates the dispute resolution process based on predefined rules set by the merchant.
What kind of actions can merchants take in response to an Ethoca Alert?
Merchants can issue refunds, stop shipments, provide additional information to the customer, or gather evidence to contest the dispute based on the specifics of the alert.
Is Ethoca Alerts an automated system like Visa RDR?
No, Ethoca Alerts requires merchant involvement for each alert. Unlike the automated process of Visa RDR, merchants must manually review and respond to each Ethoca Alert.