In the early days of eCommerce almost no payment gateway offered merchant protection from chargeback. Liability was shifted to the merchants in card not present purchases and few services were provided to deal with it. Merchants had to defend themselves by imposing multiple limitations on their business and their consumers, to make sure that they stay under the chargeback limit set by the card associations.
Nowadays, when trying to weigh the advantages of merchant protection plans offered by new service providers, many merchants focus on the cost. A lot of gateways offering protection services do so while pricing for their risk, sometimes getting to as high as 10% take rate on smaller purchases. While that price definitely doesn’t make sense, it’s often not the right approach to only weigh the price of protection against the expected savings in fraud losses; complete merchant protection has other positive impacts that must be considered.
What are the top 3 benefits of Merchant Fraud Protection plans?
- Reduce loss rates: the most obvious and direct impact on your bottom line. Merchant chargeback protection takes away fraud losses and can impact your bottom line by up to several percentage points – depending on your business and loss level. Any cent you save from it is a cent you can reinvest or use make your business even more profitable.
- Sell more: one of the often neglected positive impacts of Merchant Fraud Protection is that many limitations you may have imposed on your business become obsolete. Selling large ticket items, selling internationally or simple allowing individual customers to buy more and more often are some of the advantages of a protection plan that’s backed by a strong decision engine. The Signifyd team has seen some merchants triple and quadruple their sales by simply opening up to new markets, and being able to expand more quickly.
- Reduce operational cost: last but not least, merchants spend a lot of money on operating fraud prevention solutions, whether by paying external vendors or having internal teams – or both. These are put in place to maintain the loss at its current level – without them, losses can be as high as 15% for some industries as fraudsters learn your weaknesses and pound on them without being countered by anyone. Merchant protection removes the need for a lot of this investment – though you will always need a team of experts internally – and allows you to use your employee in projects that are core to your business.
Properly priced merchant protection based by strong decision algorithms can grow your top line and your margin at the same time – if utilized correctly. Signifyd’s SMB product provides you this type of protection – apply for the beta today to reserve a spot!
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