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Deflection First: How Fraud Deflect Cuts Chargebacks and Protects Your Revenue
At Durango Merchant Services, we’re thrilled to announce our partnership with Fraud Deflect, a cutting-edge solution designed to combat chargebacks and save merchants significant costs.
If your business operates in high-chargeback industries like nutraceuticals, subscription services, gaming, SaaS, adult/dating, online training, or similar sectors, Fraud Deflect could be the tool you need to protect your revenue and streamline operations.
In this blog, we’ll dive into how Fraud Deflect works, why it’s superior to standalone services like Ethoca or Verifi, and how it can benefit your business.
The Chargeback Challenge: Friendly Fraud on the Rise
Chargebacks are a costly reality for many merchants, especially in industries prone to “friendly fraud”— when a cardholder disputes a legitimate transaction, claiming it was unauthorized. These disputes not only result in lost revenue (the transaction amount plus fees) but also consume time and resources to resolve.
Traditional chargeback management tools like Ethoca and Verifi’s Rapid Dispute Resolution (RDR) help by facilitating communication between merchants and issuers, but they often fall short in preventing chargebacks altogether.
Fraud Deflect takes a proactive approach, leveraging real-time data to empower issuing banks to make informed decisions before a chargeback is processed. Deflection First is solving a dispute BEFORE it becomes a chargeback. Instead of waiting for the problem to scale, Fraud Deflect acts at the first sign of contestation — NO REFUND, NO LOSS, YOU SAVE THE SALE. It offers a significant advantage over interception-only solutions.
How Does Fraud Deflect Works?
Fraud Deflect’s innovative workflow evolves chargeback management by integrating seamlessly with existing systems. Here’s how it works:
- Real-Time Data Sharing: When a cardholder initiates a dispute, Fraud Deflect provides the issuing bank with detailed transaction data instantly. This includes evidence like IP addresses, device fingerprints, or purchase history that verifies the cardholder’s involvement.
- Chargeback Deflection: By presenting this data before the dispute escalates, Fraud Deflect enables issuers to resolve the issue without processing a chargeback. For example, if the system proves the cardholder authorized the transaction, the issuer can deny the dispute, preserving the merchant’s revenue by not having to issue a refund.
- Cost-Effective Resolution: Fraud Deflect saves the sale - charging only $35 per deflected dispute (plus your existing RDR/Ethoca fees). This is a small price compared to losing the entire transaction value, which can be substantial for some businesses.
- High Deflection Rates: Fraud Deflect: achieves approximately a 30% deflection rate on disputes. For a merchant with 200 disputes and an average transaction of $200, this translates to 60 deflected chargebacks — preserving $12,000 in transaction revenue.
Why Fraud Deflect Outshines Ethoca and Verifi Alone
Services like Ethoca and Verifi focus on interception — resolving disputes after they’ve already been initiated. This reactive approach adds operational overhead and forces merchants to issue refunds — losing the sale, eroding both revenue and margin.
Fraud Deflect’s Deflection First model, by contrast, stops disputes before they ever become chargebacks or refunds, delivering clear, measurable advantages:
Deflection = Higher Savings
Let’s revisit our example with a 30 % deflection rate. A merchant has 200 disputes per month at $200 each — $40 000 of revenue at risk.
Interception Only (Ethoca/Verifi)
- Intercepted disputes: 97 % of 200 → 194
- Interception fees: 194 × $21 (average cost) = $4,074
- Sales refunded: 194 × $200 = $38,800
- Chargebacks: remaining 6 → 6 × $200 = $1,200, plus card-brand flags
Total cost: $4,074 (fees) + $38,800 (refunded sales) + $1,200 (chargebacks) = $44,074
Deflection-First (Fraud Deflect) + Interception
- Deflected disputes: 30 % of 200 → 60
- Saved revenue: 60 × $200 = $12,000
- Deflection fees: 60 × $35 = $2,100
- Remaining disputes: 140
- Intercepted: 97 % of 140 → 136
- Interception fees: 136 × $21(average cost) = $2,856
- Sales refunded: 136 × $200 = $27,200
- Chargebacks: remaining 4 → 4 × $200 = $800, with card-brand flags
- Intercepted: 97 % of 140 → 136
- Total cost: $2,100 (deflection) + $2,856 (interception) + $27,200 (refunds) + $800 (chargebacks) = $32,956
Net Savings
Switching on Fraud Deflect’s 30 % deflection cuts your monthly cost from $44,074 to $32,956 — a $11,118 saving—while preserving an extra $12,000 in revenue and minimizing card-brand flags.
Even Bigger Wins with Fraud Deflect
Some Fraud Deflect clients see 40–50 % deflection rates, translating to substantially higher revenue preservation and cost reduction.
Keep Every Dollar
Deflection saves 100 % of each sale (e.g., $200 per transaction). By contrast, interception methods require refunds—resulting in lost revenue. In high-ticket verticals like gaming or subscriptions, those losses can add up to thousands of dollars.
Deflection (Fraud Deflect) x Interception (Traditional Solutions)
Fraud Deflect | Traditional Solutions | |
---|---|---|
When it acts | Before dispute | After alert is triggered |
Impact | Prevents it entirely | Refund required |
Financial cost | Saves the sale | Sale lost |
Final result | No dispute, no TC40, no VAMP impact | Prevents the chargeback but the damage is done |
Is Fraud Deflect Right for Your Business?
If you operate in high-risk verticals — gaming, subscriptions, SaaS, nutraceuticals, adult/dating, online training, and similar sectors — Fraud Deflect can transform your chargeback management. By preventing friendly fraud in real time, it saves more than traditional tools like Ethoca or Verifi, all while maintaining comparable costs.
At Durango Merchant Services, we’re proud to offer this solution to our clients, helping you protect your revenue and streamline operations.
Ready to learn more?
Contact us at Durango Merchant Services Let’s deflect chargebacks and boost your bottom line together!