Recent Acquisitions Show Path Forward in Chargeback Mitigation

An area in payments that has been heating up over the past year and a half is the handling of credit card payment disputes, AKA chargebacks. Four chargeback mitigation solutions have been acquired in the last 18 months: Chargehound by PayPal, Chargebacks.com by Sift, ChargebackOps by ClearSale and last week Midigator by Equifax.

The timing of the Midigator deal, rumored to be in the low nine figures, could not have been better. The downturn in U.S. equity markets and venture capital fundraising means business leaders are now looking to improve the efficiency of capital deployed. This includes recovering sales revenue lost to credit card chargebacks.

At the same time, as Justt's recent Customer Attitudes Towards Chargebacks in 2022 survey report shows, two-thirds of U.S. consumers have filed at least one credit card dispute in the past year. Already in 2021, Mastercard estimated there were 615 million chargebacks around the world. The demand for chargeback recovery services is there and should be expected only to grow as eCommerce continues to flourish and card-not-present payments with it.

The productization of chargeback recovery

One major characteristic of the three larger acquired companies (Midigator, Chargebacks.com and Chargehound) is that they are all tools for managing chargebacks but not fully outsourced solutions that require an independent source of manpower. These companies products were and are targeted to merchants who have internal teams to handle chargebacks and want to make them more productive. This points to a trend in the payments space made possible by technology: the productization of chargeback mitigation.

In the very near future, it will be possible for merchants to automatically process close to all their chargebacks without any human intervention internal or external to the company. Justt is already on the cusp of achieving this major accomplishment. The power of market competition will ensure that other solutions invest in R&D and follow suit.

Integration into fraud prevention suites

Another observation worth making is that at least in the case of Chargeback.com-Sift and Midigator-Equifax tie ups chargeback solutions are being integrated into broader anti-fraud solution suites. On this front as well, Justt already partners with major pre-transaction anti-fraud solution providers. However, the tool acquisitions will add pressure in the market for closer cooperation with tools that identify good customers before approving transactions not just in a business sense but also in a technological sense of sharing data and analytics.

If you are a merchant or a payment service provider, this is all welcome news. Odds are you are bleeding a significant amount of resources due to the hidden costs of chargebacks. If you could return the focus of your business to revenue generating activities and add percentage points to your bottom-line with a few simple steps, you should jump at the opportunity. Some companies in the chargeback mitigation industry already offer to take the problem of chargebacks off your hands. But the degree of convenience in doing so is about to take a giant leap forward.

The future is coming at light speed

Stay abreast of developments in the space over the next 12 months. Get into serious conversations with the vendors out there and learn their product development plans. Gaps will be developing between the tech-forward chargeback recovery solutions and legacy solution providers.

The time of chargebacks as a drawn out manual process and chargeback mitigation as a service industry are drawing to a close.  Be ready to witness this fintech revolution in payments. It’s long overdue.