According to Pew Research, 15% of U.S. adults say they have used an online dating site or a mobile dating app. Dating services are a $2.5 billion business in the U.S. and online dating services in particular account for a healthy 70% of that.
People love matchmaking sites and they’re willing to pay for a chance to meet their perfect partner (or sub, or dom…). The sky is the limit when it comes to profitability of online dating sites and mobile apps. The only thing holding an online dating merchant back is…online dating chargebacks.
Bondage: When Chargebacks Dominate
Online dating chargebacks are a serious problem. Unfortunately, some merchants are in an S&M relationship with chargebacks and it’s not fun. The online dating industry is very susceptible to chargebacks and all their accompanying fines, fees and penalties. Without the right tools and protocol in place, a merchant may find they are tied up in chargebacks without recourse.
When a customer disputes an online dating service charge, the merchant faces a charge from their credit card processor. When these disputes happen too frequently, the card brands may actually step in and lay out requirements for a merchant to get their chargeback ratio in order. If the merchant continues to have a chargeback problem after preliminary warnings, they become at risk for merchant account termination. Merchant Account Termination is the four-lettered word of the payment processing industry.
Peekaboo: Card Network Chargeback Monitoring
Once online dating chargebacks surpass the acceptable threshold of a 1% chargeback ratio, the networks will actually step in. Excessive online dating chargebacks are a threat to the card brands, so they will intercede when chargebacks become a problem. They start by helping acquirers identify merchants with excessive chargeback ratios. The acquirers are then tasked with aiding the merchants in chargeback reduction by assessing fraud controls and the payments operation.
Merchants must plan, strategize and communicate a detailed chargeback management road map that highlights chargeback pressure points and outlines remediation and prevention strategies. For merchants new to the online dating game, this can be overwhelming.
More often than not, online dating merchants are categorized as high risk by the acquirers, merchant account providers and payment processors. Not only does this make it difficult to obtain a merchant account, but it also makes it difficult to maintain one in good standing. Card networks like Visa formerly had specific requirements for high risk merchants who have a chargeback problem: Known as the High Brand Risk Chargeback Monitoring Program (HBRCMP), this program applied to all merchants deemed high risk according to their merchant category code (MCC). If chargebacks became excessive, these merchants were “demoted” from the standard Merchant Chargeback Monitoring Program to the HBRCMP if they failed to get chargeback under control.
Visa has since changed their monitoring program and has developed new thresholds and timelines to address chargebacks:
|Early Warning||Chargeback ratio > 0.75%||[None]|
|Standard||Chargeback ratio > 1%||[None for months 1-4];
Months 5-6 = $50/chargeback
Months 8-8 = $100/chargeback + $25k review fee
|Excessive||Chargeback ratio > 2%||Months 1-6 = $100/chargeback
Months 7-12 = $100/chargeback + $25k review fee
The early warning thresholds trigger an early warning when chargeback rates are steadily increasing. After those thresholds breach 1%, Visa sends an official notification to the acquirer, who then notifies the merchant and begins enforcement of chargeback mitigation plans. Months 2-4 are mean for merchants to enact the mitigation plan and successfully reduce chargebacks. If the chargeback ratio is not lowered during that period, fees are imposed moving forward.
Kicking the Fraud Fetish and Moving Forward
Merchants need to be smart about their chargeback mitigation plan if they breach acceptable chargeback ratio thresholds. Working with an experienced digital payment advisor can mean the difference between tens of thousands of dollars in fines and fees. Often times, online dating merchants are strapped for time and resources and don’t have the internal staff to create a thorough and effective chargeback reduction plan. Hiring an outside consultant can alleviate the burden on internal resources, allow merchants to focus on their core business and provide an actionable way to get chargebacks back in check. More importantly, you can avoid an ugly breakup with your payment processor.
Are you an online dating merchant looking to crack the whip on chargebacks? Contact us to schedule a consultation today.