At first, hearing about a chargeback guarantee can sound like a great solution for your online business. After all, every merchant agrees that chargebacks are a huge headache: not only do they imply high fees and penalties, but your online store also faces losses from shipping the product and processing payments for an illegitimate transaction.
So how could a chargeback guarantee be a disadvantage? This is what we will be narrowing down in this article.
What is a chargeback guarantee?
A chargeback guarantee consists of a system that filters transactions before payment acceptance and covers the losses in the case of a fraudulent transaction. This type of insurance is a service hired to completely protect the merchant against chargebacks by rejecting high-risk sales.
Sounds good, right? But there is one setback: this service can lower your conversion rates, affecting your revenue.
How can a chargeback guarantee affect your conversion rates?
Sure, your fraud rates will be lower with a chargeback guarantee – and, consequently, so will your chargeback rates. However, you are likely to face false positives since the system can mistakenly deny legitimate transactions.
In other words: your approval rates will reduce as purchases made by good customers may be denied. This occurs in order to lower the risk of fraud taken on by the company providing insurance against chargebacks.
The low number of chargeback requests is actually disguising low approval rates, as a number of legitimate sales are not concluded. The result? You sell less, and your revenue is seriously affected.
How to keep your chargeback rates under control
Consequently, keeping your chargeback rates under control is crucial for the financial health of your business. This is why working with the right anti-fraud solution is so important for online stores: this tool should be able to effectively filter transactions without harming your conversion rates. In fact, an anti-fraud solution not only avoids canceling legitimate sales but also adds a number of benefits to your store, as seen in this article.
PagBrasil’s PagShield® is an intelligent state-of-the-art antifraud tool especially designed for the Brazilian market. Our tool uses machine learning to fight fraud based on consumer behavior, aiming at suspicious transactions, and approving legitimate sales.
Want to learn more? Get in touch with our team to know more about our solutions!