ost ISOs are encouraged when they see their credit card processing volume increase. More volume means more revenue. Unfortunately, with increased processing volume comes increased chargeback risk. In the most basic terms, a chargeback occurs when a credit cardholder and a merchant disagree about a charge to the cardholder's account. One side believes the charge is valid and the other does not. The reason might be as innocent as a mistaken duplicate charge or as suspicious as theft or forgery.

Regardless of how or why the chargeback came about, defending cardholder disputes costs merchants and acquirers time, labor and money. ISOs and acquirers spend millions of dollars every year on chargebacks. Even if the merchant and acquirer "win," they've still expended valuable resources defending and processing the dispute. So, they really don't win at all.

In response, more and more ISOs and banks choose to outsource this piece of their business. They believe it is in their best interest to leave dispute processing to the professionals.

Many acquirers find that outsourcing frees up time and resources, so they are able to take care of their merchants rather than jump through hoops to meet required deadlines, update dispute processing technology or train staff on the latest card Association rules. Many banks, processors and ISOs have chosen to work with Merlin Solutions LLC for their dispute processing needs.

Merlin offers a turnkey outsourcing service that encompasses all aspects of the dispute process, including retrieval requests, chargebacks, re-presentments, compliance, arbitration and good faith collections. The company also provides dispute processing consulting and software services and will customize its services to meet the needs of its customers.

Merlin was founded in July 1998. In 2003 Vital Processing took majority ownership of the company. "This provides us with financial strength and a large market to grow our company," said Anthony Weare, President of Merlin.

If you've worked with Vital before, you might be familiar with Merlin's services or have even used them. The company's service is marketed as Vital Dispute Processing Services, Powered by Merlin Solutions.

Merlin's mission is to provide dispute-processing services to all banks and ISOs that could not justify the cost of automated systems necessary to control the dispute process.

"Our goal is to reduce risk, lower back-office costs, eliminate compliance issues and improve merchant operations," Weare said.

There are three main reasons why Merlin has enjoyed success. First, the company has processed almost 1 million cases. Second, it boasts a 100% accuracy rate. Third, it does not require ISOs or banks to invest any money up front.

Chargebacks as a Revenue Generator

ISOs, banks and processors use Merlin's solutions with no upfront investment. In other words, it's a "pay for what you use" service. There is no cost for setting up the system. Instead, Merlin charges a fee for every case it processes. The fee varies depending on the transaction type, volume of business processed and length of contract signed with Merlin.

These fees are separate and independent from what the ISO or bank charges the merchant for a chargeback. Weare said ISOs often charge between $15 and $25 per chargeback. Merlin's most expensive chargeback fee is significantly less than this. Using the Merlin solution is actually a moneymaker for ISOs.

"If the chargeback center is seen as a cost center, we can make it a revenue generator," Weare said. "They set the pricing." Customers might even choose to provide the service to their merchants free of charge, if they wish to provide the service as a value-added feature of their basic services.

One feature that makes Merlin unique is its dispute processing system, MerLink-DRS, which the company debuted in 2003. MerLink-DRS automates the chargeback process while capturing data and document images.

"We continue to enhance the system to meet and anticipate our customer's needs and to maintain the system in Association compliance," Weare said. He also said Merlin has had no unscheduled downtime since it put the system into production.

The MerLink-DRS system provides customers real-time reporting and real-time access to individual cases. It also offers flexible search options.

"In order to ensure that our customers have complete control of their merchant operations, we provide secure Internet access into our systems to enable them to monitor all of their disputes down to the individual chargeback and document image level," Weare said.

Merlin has also recently announced its signature-capture product, which went into production in August 2005. "This provides for the storage and retrieval of electronic signatures and will allow us to respond to retrieval requests and certain types of chargebacks without the necessity of bothering the merchant," Weare said.

Next year, Merlin will add an issuer dispute module. "This is at the request of some of our customers who would like to enjoy the benefits we currently provide on the acquirer side of their operations to their issuer operations," Weare said.

Outsourcing While Preserving Control

Many banks and ISOs are reluctant to outsource their dispute processing because they fear they will lose control of their merchant relationship. "In fact, outsourcing to Merlin gives them greater control," Weare said.

The company allows banks and ISOs to access Merlin's systems through the Internet and a secure firewall. From here they access a variety of online and real-time reports from which they extract data at any time.

They download data to Adobe or Excel files. Customers then take this information and upload it to their in-house systems, such as Microsoft Access databases or other data processing programs. The detailed, real-time data give them greater control over their accounts.

This increased control, Weare explained, enables banks and ISOs to have greater control of their merchant relationships, thereby lowering their risk.

"We lower our customer's risk by providing up-to-date and accurate information online," Weare said.

Merlin customers choose how to view and sort information so they can monitor data by merchant, dollar amount, number of chargebacks received or a variety of other parameters.

Maintaining a Human Touch

Merlin's success is not only about the technology and services it provides. A company might have the best technology and the most current products but if it doesn't have a knowledgeable staff dedicated to customer service, it won't be successful.

All Merlin's chargeback investigators have at least 14 years' experience. This may be how the company maintains its 100% accuracy rate and why it guarantees its service. "If my people mess up, if they don't resolve a chargeback correctly, if they don't use the right reason code, or if they go beyond the Visa and MasterCard timeframes, we will pay for the chargeback," Weare said.

The company is doing something right; after six years it has never had to assume the cost of a chargeback.

Merlin works to maintain relationships with its customers, as well as its customers' merchants. "We keep in constant contact and work with them to resolve any issues that may arise," Weare said. Customer and merchant service is available five days a week, from 8:00 a.m. to 5:00 p.m. and until 9:00 p.m. for Vital customers.

The dedication to customer service carries into the company's internal work environment as well. "We foster a friendly and open work environment," Weare said. "This can be seen in the fact that in nearly seven years we have had virtually no attrition."

For many acquirers, banks and ISOs, outsourcing dispute resolution services is good business sense. It lowers the costs of back-office operations, reduces risks and limits the hassles associated with cardholder complaints.

For banks and ISOs that don't want to make a large upfront investment, Merlin might be the right solution for them. Merlin has the experience of processing 1 million cases and the skills to process them with 100% accuracy.