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Disputifier founder on winning chargebacks

Mark Wagner believes that the best chargeback recovery systems are automated and data-driven. Building on this premise, in 2021 he founded Disputifier, a chargeback software company based in Austin, Texas.

He told me, “Over the years we have developed an intuitive system. It combines transaction data with our tests and identifies the appropriate response.”

We recently spoke with him about the state of chargebacks in e-commerce and how sellers can recover from fraudulent claims. The audio of our entire conversation is below. The transcript has been edited for length and clarity.

Eric Bandholz: Tell us what you do.

Marek Wagner: I run a software company called Disputifier. We are an automated chargeback recovery agency. We see that over 60% of chargebacks are fraudulent. They are not impossible to win. It’s more about separating important credit cards. Let’s say a fraudster bought your credit card information on the dark web. This is a completely different situation than a customer trying to get free stuff.

We help with double chargebacks [where a cardholder wins a chargeback, then loses it, then refiles it], which are difficult to prevent but easy to win. Duplicates are our highest win rate – around 90%. In case of duplicate responses, we have included screenshots of the checkout page and purchase process. After testing, we forward all evidence to the card issuer. We have a lot of data determining exactly how to format responses, which can have a huge impact.

We present the evidence in the form of PDF files. So instead of using Shopify Payment’s answer, we built our own from scratch. We can highlight certain areas and make it almost like a lawsuit with different sections. We try to format it differently than Shopify.

Bandholz: Are the documents read by real people at the issuing banks?

Wagner: Yes, banks will print out your chargeback response and drop it on someone’s desk. This person will manually review it and decide whether or not to side with the merchant once the merchant has made arrangements with the cardholder. This is why formatting and images matter. We limit the text to a minimum – two to three sentences. People are visual creatures. It all depends on the format, graphics, images and the way they are presented.

We’re software-driven, which means we programmatically ingest data from Shopify and other sources and then add it to our automated response. We manually check our responses to ensure they match and whether we have any unusual evidence, but typically over 90% of the responses remain unchanged from those generated by our system.

Bandholz: Can’t you just use Shopify’s fraud analysis?

Wagner: Shopify’s fraud analysis is too simple and not always helpful. It may contain 10 data points with no explanation as to why the chargeback is marked as low or high risk. For example, Shopify may mark a chargeback as low-risk even if the order was placed outside North America and shipped to California. It does not make sense. Conversely, many of them are marked as high-risk cases without serious indicators. If you return them, you will lose money. We conducted tests. About 7% of medium-risk orders on Shopify (and 35% of high-risk orders) turn into chargebacks. So the vast majority are legal buyers.

Bandholz: How much effort should merchants put into fighting 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 a higher average order value – from hundreds to thousands of dollars. If your AOV is lower, you shouldn’t spend your time on it.

When I managed e-commerce brands, we had an employee who was trying to determine whether an order was fraudulent. She called everyone in the office and said, “Guys, look at this.” Ultimately, we still had plenty of chargebacks. This is an imperfect process that is best left undone by humans.

Bandholz: What is Disputifier’s approach?

Wagner: Over the years, we have developed an intuitive system. It combines transaction data with our research and identifies the appropriate response. It combines both. This is a response tailored to each order, but follows the template. This format has worked well for us. It then goes through manual verification and is submitted on behalf of the seller.

We make money by taking a percentage of winning orders.

When Shopify brands come to us, they win about 25%. Our win rate is just over 50%, depending on the processor. Alternative payment methods appear to be subject to a fair dispute resolution process, while credit card companies can be unpredictable.

Merchants should always require customers to agree to terms and conditions, including returns policies, during checkout. Customers cannot complete their order unless they click the box to consent. Merchants can then refer to it if a customer falsely requests a refund. This helps your win rate significantly.

Again, this is about high AOV. I wouldn’t do it at low AOV. Additionally, for very large orders – $5,000 or more – sellers should enter into an actual contract with the customer. This will also help you win. Never take risks with large purchases.

Sellers should test and determine what a winning response looks like. It’s difficult for brands to develop the entire chargeback process on their own. It is dark. Each bank has slightly different rules.

Bandholz: Where can I get your software?

Wagner: Our website is here Disputifier.com. Follow me on Twitter at @themarkwagner or on Instagram AND LinkedIn.

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