Mark Wagner believes that the best chargeback recovery systems are automated and data-driven. He founded Disputifier, a chargeback software company based in Austin, Texas, on this basis in 2021.
He told me: “We have developed an intuitive system over the years. It combines transaction data with our tests and identifies an appropriate response.
He and I recently discussed the state of e-commerce chargebacks and how merchants can recover from false claims. The audio of our entire conversation is embedded below. The transcript is edited for length and clarity.
Eric Bandholz: Tell us what you do.
Marc Wagner: I run a software company called Disputifier. We are an automated chargeback recovery agency. We find that more than 60% of chargebacks are fraud. These are not impossible to win. Rather, it is about separating valid credit cards. Let’s say a scammer purchased someone’s credit card information on the dark web. This is a very different situation than a customer trying to get free products.
We help with duplicate chargebacks [where a cardholder wins a chargeback, then loses it, then refiles it], difficult to prevent but easy to win. Duplicates represent our highest success rate – around 90%. We are attaching screenshots of the checkout page and purchase process for duplicate answers. We submit all evidence to the card issuer after testing. We have a ton of data identifying exactly how to format a response, which can have a huge impact.
We present the evidence via PDFs. So instead of using Shopify Payment’s answer, we created our own from scratch. We can highlight specific areas and almost make it a trial with different sections. We try to format it differently than Shopify.
Bandholz: Do real people working at the issuing banks read the documents?
Wagner: Yes, banks will print out your chargeback response and throw it on someone’s desk. This person will leaf through it manually and decide to side with the merchant even though they have already agreed with the cardholder. Formatting and images are therefore important. We keep the text to a minimum – two to three sentences. People are visual. It’s all in the format, the graphics, the images and the way it’s presented.
We’re software-based, which means we programmatically ingest data from Shopify and other sources and then add it to our automated response. We manually review our responses to ensure they are up to par and whether we have custom evidence, but typically over 90% of responses are unchanged from what our system generates.
Bandholz: Can’t you just use Shopify’s fraud analysis?
Wagner: Shopify’s fraud analysis is too basic and not always useful. It can contain 10 data points without explaining why a chargeback is flagged as low or high risk. For example, Shopify may mark a chargeback as low risk even if the order was placed outside of North America and shipped to California. That does not make sense. Conversely, many are flagged as high risk without any serious indicators. If you pay them back, you lose money. We have carried out tests. About 7% of Shopify’s medium-risk orders (and 35% of high-risk orders) turn into chargebacks. The vast majority are therefore legitimate buyers.
Bandholz: What efforts should merchants make to combat chargebacks?
Wagner: It depends on your size, business model and average order value. This becomes a necessary but labor-intensive process if we are talking about higher average order values – hundreds or even thousands of dollars. If your AOV is lower, you shouldn’t spend time on it.
When I ran ecommerce brands, we had an employee who tried to determine if an order was fraudulent. She would call everyone in the office and say, “Guys, watch this. » In the end, we still had a ton of chargebacks. It’s an imperfect process that’s best not done by humans.
Bandholz: What is Disputifier’s approach?
Wagner: We have developed an intuitive system over the years. It combines transaction data with our tests and identifies an appropriate response. It merges the two. This is a personalized response for each command but matches the model. This format worked for us. It is then manually reviewed and submitted on behalf of the merchant.
We make money by taking a percentage of the orders we win.
When Shopify brands contact us, they earn around 25%. Our win rate is just over 50%, depending on the processor. Alternative payment methods appear to have a fair dispute resolution process, while credit card issuers can be unpredictable.
Merchants should always require customers to agree to the terms and conditions, including the refund policy, when paying. Customers cannot complete their order unless they click the box to accept. Sellers can then refer to it if a customer wrongly requests a refund. This contributes significantly to the win rate.
Again, this is for a high AOV. I wouldn’t do it with a low AOV. Additionally, for very large orders – $5,000 or more – merchants must enter into a real contract with the customer. This will also contribute to a victory. Never take a risk with a big purchase.
Traders need to test and determine what that winning response looks like. It’s difficult for brands to understand the entire chargeback process themselves. It’s murky. Each bank has slightly different rules.
Bandholz: Where can people get your software?
Wagner: Our site is Disputifier.com. Follow me on Twitter at @themarkwagner Or on Instagram And LinkedIn.