Profit from Merchant Solutions, not Fees

Market leadership in merchant services isn’t just about revenue and earnings; it’s about the quality of the revenue you’re earning. You can hike fees and have a great a quarter or two before disintermediation starts to whittle those gains back down. Or, you can generate more sustainable revenue by helping your merchants reduce their fees and penalties. If you want to get away from churn-and-burn fee-based billing models for a more solutions-based service model, you need to understand the obstacles and problems merchants face. We’re going to feed two mouths with one morsel here, as we explain the threats to merchant revenue posed by fraud, chargebacks and transaction disputes. This will help acquirers and merchant service providers understand the scope of the problem so they in turn can apply their leverage to diminish those obstacles for their clients. It’s win-win! Fraud and its downstream effects present a significant threat to merchant revenue in all sectors. Resulting chargebacks can damage bottom lines not only with penalties and shrink. Merchants also suffer hidden operational costs as they work to mitigate this problem:

• In 2016, fraud costs retailers more than 7.5% of their annual revenue, which looms larger for merchants with thin margins. ¹
• Managing transaction disputes consumes 14 to 23 percent of a merchants operating budget ²
• Every $1 charged back from US retailers in 2020 cost them $3.75, while it was $3.13 in 2019; a nearly 20% increase ³
• False declines knock off an average 2.3% of monthly revenue ⁴

This is just a snapshot of the damage sustained by merchants from fraud and transaction disputes; fraud, false declines and mitigating OpEx can chomp away a whopping third of merchant revenue. Furthermore, it also demonstrates how reactionary attempts at dispute management can actually magnify that damage. Common merchant miscues include:

• Pre-auth fraud filters may reduce third-party fraud, but they also increase false declines. They also do not stop first-party fraud committed by cardholders.
• Refunding all disputes to reduce chargebacks and fees also overlooks first-party fraud disputes which could otherwise be deflected by the merchant.
• Inhouse dispute management is effective but expensive. Recruiting, training and maintaining or diverting staff significantly increases the costs of fraud and chargebacks.

These are just a few examples of “good initiative, bad judgement.” Merchants need to manage their disputes, they also need effective leadership to implement the right solutions. Who could better lead them to process more profit and less fraud than their acquirer or MSP? When your services come standard with the right dispute management tools, you profit from helping your merchants lower their dispute costs. You’re trading revenue from fees and penalties with selling merchants tools for better revenue retention; that’s a value-add that merchants flock to. It is a proven formula: your clients pay a fraction of the fees, penalties and OpEx, and you still get your revenue from helping them focus the savings on their core business. DisputeHelp’s white label platform can put you in the drivers seat, supported by our experienced management team, to form a symbiotic partnership against fraud, disputes and chargebacks.