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Titan · 03-15-2006, 06:58 PM

Your assuming that it takes 3 months for people to chargeback their credit card. If they chargeback within a couple weeks then scrubbing will most certainly be effective in lowering chargeback ratio for the month. Heavy scrub + rebills will dramatically lower chargeback ratio. The other major flaw in your logic is that you say by increasing transactions you will decrease the chargeback ratio. This obviously isn't correct if the chargebacks take less than a month to occurr. The other major problem with this is that even if you assume that chargebacks take an average of 3 months to occur, by increasing transactions you will increase the chargeback ratio dramatically in 3 months. So if they increased transactions they would destroy themselves in 3 months unless they dramatically increased transactions processed every single month. This would be basically a ponzi scheme where at one point the bubble would burst. Since ccbill/paycom have been around a long time I find it highly unlikely they would do this. So logically if chargebacks are high this month they would scrub immediately to prevent more chargebacks. And assuming a long term chargeback ratio they would still scrub to avoid a bubble bursting scenario.

Quote:

Originally Posted by Kimmykim

That's not correct, nor is it logical.

If there were a chargeback issue with a processor, or with a merchant account, reducing the number of transactions coming through the gate would actually make the chargeback situation worse.

For instance if someone gets 1000 sales and 3 months later there are 100 chargebacks from those sales, that would be a 10% cb ratio in the month the chargebacks came in - NOT referred back to the month the charges were made.

So if you then decided to scrub so hard that the number of transactions the next month was only 500, you would still have the same chargebacks coming in from 3 months prior -- when there was a problem under your theory of scrub -- and with the same 100 chargebacks you would have a 20% ratio, or double the ratio.

HOWEVER, if you doubled the transaction volume to 2000 transactions, that same 100 chargebacks would end up being a 5% ratio, a drop by half.

Neither 5, 10 nor 20% is allowed, I chose the numbers to make the math easy for the example. Chargebacks are allowed in percentages under 1 or 2, depending on the region, and getting more volume is the name of the game.

So this theory of scrubbing is yet again proven false.

Who knows why some days suck and some days are great. There is no real logic for it, and the law of averages isn't formulated on one days worth of numbers.