What is CDRN Alerts & Do you need it?

I’m transitioning from selling physical products to digital ones and need a chargeback prevention plan. I learned about CDRN and thought it might help.

I’ll share what I’ve learned, including how CDRN works, its effectiveness, and other useful details.

Let’s begin with what CDRN is.

Key Takeaways

• Merchants have 72 hours to respond to pre-disputes.
• Prevents up to 41% of chargebacks in some industries.
• Primarily covers Visa transactions.
• Works only for US-based customers.
• Can cause duplicate charges if used with Ethoca Alerts.
• Costs up to $40 per alert (depending on the provider).

Chargeback offers CDRN alerts along with RDR and Ethoca alerts. This makes chargeback prevention easier.

Learn more about how they work.

What is Verifi CDRN?

Verifi CDRN (Chargeback Dispute Resolution Network) is a system that alerts merchants of potential chargebacks. It connects with issuing banks, giving businesses 72 hours to resolve issues before a dispute occurs.

Unlike RDR, businesses must manually issue refunds for customers if they use this route.

But some alerts resellers will deal with refunds on your behalf, though (like us).

It’s a “closed-loop” system, and Verifi claims it provides “accurate, true indications of customer disputes.”

That sounds like marketing mumbo jumbo to me. What caught my attention is that it doesn’t include TC40 data like other open-source solutions.

This is helpful because TC40 reports can flag credit card fraud attempts that issuers refund automatically. That costs businesses money unnecessarily.

More on how to get TC40 reports here.

If you’re familiar with RDR and Ethoca Alerts, you know they cover most Visa and Mastercard orders.

Here’s what CDRN’s coverage looks like:

• Visa: 50%
• Mastercard: 5%
• Other card networks (e.g., AmEx and Discover): 30%

I couldn’t find data on how much American Express and Discover orders CDRN covers.

In summary, CDRN is a chargeback alert provided by Verifi. While all alerts have the same goal, they cover different types of transactions. I’ll discuss more on this later.

More on chargeback alerts here.

And what is Verifi?

They’re a post-purchase solutions provider for chargebacks that Visa acquired in 2019. I’ll provide more details here.

It’s time to move on.

Let’s see how it works.

Summary: Gives the merchant 72 hours to deal with an order issue before proceeding to a chargeback.

How Do CDRN Alerts Work?

CDRN alerts notify merchants when cardholders dispute transactions. Merchants receive real-time warnings, allowing them to contact customers directly. This process helps prevent chargebacks, resolve disputes, and protect revenue before formal disputes occur.

When a customer complains to their card issuer, the bank sends the details to Verifi.

From there, Verifi CDRN notifies you (the merchant) with:

• Chargeback reason
• Order details
• Supporting documents

At this point, we’re still in the pre-dispute phase. Meaning, no chargeback has occurred.

The seller has 72 hours to either:

• Immediately refund the order
• Accept the chargeback
• Fight the issue (representment)
• Reach out to the customer

Refunding immediately avoids a chargeback fee and keeps your dispute rate unchanged. If you’re unlikely to win the dispute, this is usually the best option.

Here’s a visual of how the entire process (including RDR) would go:

Screenshot from Verifi

But what happens if you contact the customer and can’t resolve the issue? Or if you choose to fight it?

Well:

The pre-dispute may escalate to a formal dispute. Whether this leads to a chargeback depends on the card network. Many use “chargebacks” and “disputes” interchangeably.

See the potential differences between these terms here.

Afterward, you’ll need to know how the chargeback process goes with each card brand:

• Visa
• Mastercard
• American Express
• Discover

Pretty scary stuff.

Do they actually prevent disputes?‍

Summary: CDRN sends merchants alerts to refund or fight issues within 72 hours.

Does CDRN Really Prevent Chargebacks?

CDRN effectively prevents chargebacks across industries. It stops up to 41% of digital goods chargebacks, 21% for physical products, 19% for subscriptions, and 17% for digital services [1]. These percentages show CDRN's impact on reducing disputes.

Verifi reports a 41% reduction in Visa chargebacks and 32% for Mastercard, based on a 2012 study [2].

These numbers are a bit outdated but still useful as a benchmark.

Effectiveness varies by provider and depends on factors like:

• Years in businesssome text
  • More experience reduces disputes
• Transaction volumesome text
  • Higher volumes see better results
• Whether the buyer’s bank is in the USsome text
  • CDRN doesn’t work for non-US banks
• Type of productsome text
  • Digital goods perform better
• Card networksome text
  • Visa is more effective than others

Another source suggests CDRN reduces chargebacks across most areas, except for digital services. Ethoca, by contrast, prevents 33% of those chargebacks.

In a case study we did for a SaaS company, CDRN prevented 12% of chargebacks. Ethoca, on the other hand, prevented 57% in the same study.

I wouldn’t overanalyze this data. Many variables determine how effective an alert is.

CDRN works well when used alongside other chargeback prevention methods. It’s still effective as a standalone tool.

We discuss other ways to prevent chargebacks here.

Check out the price per alert before getting excited about CDRN

Summary: CDRN has proven to prevent up to 41% of chargebacks for some industries.

How Much Do Verifi CDRN Alerts Cost?

Verifi doesn’t disclose the price per CDRN alert. Many resellers usually charge around $35 per alert, though. Some charge up to $40. These prices don’t fluctuate depending on your merchant category code like with RDR.

Many resellers (like us) offer great performance-based pricing. 

Some businesses charge a large monthly fee to access these alerts and chargeback management tools.

If you use Ethoca Alerts, they may overlap with CDRN, resulting in duplicate charges. However, some resellers reimburse these duplicate charges (we do).

These alerts cost a lot of money.

Why should I pay this much?

Wouldn’t it be cheaper to consider a chargeback fee as a cost of doing business?

CDRN and similar services are ideal for businesses with high chargeback rates. These businesses need to reduce those rates to avoid dispute monitoring programs.

Such programs can fine you $25,000 or more and may stop you from processing certain cards. Without that, you’re out of business.

You could also end up on the MATCH list. This is an industry blacklist for payment processors.

More on chargeback monitoring programs here.

There has to be downsides to using these, right?

Summary: Costs will vary by provider. They’re typically around $35 per alert.

Pros & Cons of Using CDRN

Benefits of CDRN:

• Identify issues within a day, not weeks.
• Resolve customer problems fast.
• Prevent up to 41% of chargebacks.
• Blocks most chargeback types.
• Save shipping costs by stopping orders early.
• Setup takes up to 12 hours.
• Spend less time handling disputes.

Downsides of CDRN:

• Doesn't prevent friendly fraud.
• Not suitable for all sellers.
• Costs may outweigh benefits for small merchants.

Since you’re using CDRN, you can review transaction details to see if an order might involve friendly fraud. If you think it does, you have a 43.82% chance of winning. That’s higher than the 30% industry average.

You’ll need to allocate resources to decide how to handle each order. Some might view this as a downside.

We now know all basic information about CDRN.

How does it compare to other alerts on the market?

How is CDRN Different From Ethoca & RDR?

The main differences among CDRN, RDR, and Ethoca are as follows:

• Card network coverage
• Descriptors
• Refund handling
• Issuer network coverage

More on these details in a separate guide.

I’ll give you a little sneak peek here, though.

Here’s the network coverage for all 3 brands:

Descriptors are what card brands use to figure out who let through what order.

CDRN and RDR match transactions based on exact descriptors or customer service phone numbers. Ethoca uses an exact match or a “starts with” phrase.

Refund handling is where things get weird.

RDR processes refunds automatically. CDRN and Ethoca require manual refunds. Manual refunds give you more control, while automatic refunds save time.

Issuer network coverage refers to the number of banks enrolled with Verifi and Ethoca. Ethoca has more international banks, while CDRN is only available in the U.S.

RDR also has ample coverage, though.

For reference, 97% of U.S. issuers use RDR (Verifi), and 83% of international issuers have adopted it. I couldn’t find exact numbers for Ethoca, but you can use these figures for comparison.

I can’t find any numbers on Ethoca adoption, but you can use the above percentage for reference.

Which alert should you choose? Check out the earlier guide for more in-depth information.

Be cautious when using both Ethoca Alerts and CDRN. They overlap on Visa orders and can lead to duplicate charges.

Hold up…

What even is Ethoca?

I compare the differences between Ethoca and Verifi here. Check it out.

Now you might want to know how to use CDRN.

Summary: Differences come from their issuer adoption, how they handle refunds, card brand coverage, and the way they check for descriptors.

How Do I Use CDRN for My Business?

You have a couple options::

• Enroll with Verifi
• Use a reseller

To enroll with Verifi, contact their support team and request to use CDRN for your business. This option gives you access to tools like Order Insights, which lets you share more order details with customers.

You’ll also gain access to Rapid Dispute Resolution (RDR).

However:

You can’t get Ethoca Alerts through Verifi. For that, you’ll need to contact Ethoca directly.

That’s why using a reseller is often easier and cheaper.

Resellers give you access to all alert providers in one place, making it more convenient to track chargebacks. Many also offer volume pricing, which lowers the cost of alerts if you receive many of them.

These services usually don’t require much back-and-forth with customer support. You provide basic business details, set up, and then wait for alerts to appear.

We provide access to RDR, Ethoca, and CDRN alerts in one platform. See how we’ve helped merchants lower their dispute rates.

You could also try all-in-one solutions like Chargebacks911, which includes Order Insights. But I’ve heard it costs $1,000 a month for their most basic features.

That’s not affordable for most businesses.

What else should I do alongside CDRN to prevent chargebacks?

Summary: Contact Verifi directly or enroll under a reseller.

Are There Other Ways to Prevent Chargebacks?

Here are some other ways to prevent chargebacks:

• Implement fraud detection software
• Blacklist repeat chargeback abusers
• Respond quickly to customer inquiries
• Use clear billing descriptors
• Understand chargeback reason codes
• Clarify refund and cancellation policies
• Delay billing for better verification

If you offer subscription services, cancel subscriptions immediately when a customer requests it.

Mastercard reports that 60% of chargebacks in 2020 were from recurring orders [3]. Of those, 76% came from unauthorized transactions.

Many of these cases could involve friendly fraud, which accounts for 70% of credit card fraud [4]. This is speculation, though. It’s hard to identify friendly fraud clearly.

We’ve explained first-party fraud and prevention tips in a separate piece.

If you use Shopify, we’ve compared several apps that can help. Check them out in another post.

Otherwise, you’ll need tools like:

• Address Verification Service (AVS)
• 3D Secure
• Fraud flagging software
• Strong account security (e.g., 2-factor authentication)

Blacklisting customers blocks them from making purchases, preventing potential chargebacks. But it won’t stop them from creating new accounts or using fake payment details.

If something seems suspicious, consider verifying orders, like by calling the customer.

A clear refund and cancellation policy helps customers understand your terms. It also strengthens your defense during chargebacks. If the customer violates your policy, the issuer may side with you.

This won’t stop chargebacks but could improve your chances of winning. Winning disputes also means they won’t count toward your chargeback rate.

Responding to customers quickly is important. A satisfied customer is less likely to dispute an order.

A “clear” billing descriptor should include:

• Business phone number
• Product or service
• 22 – 25-characters long
• Your business name
• Short description of the product/service

And what are chargeback reason codes?

These codes explain why a chargeback was filed. Each card brand uses different codes. Knowing these codes helps you understand how to prevent future chargebacks.

We listed every reason code in this guide. Check it out.

That wraps things up.

Wrapping Up

CDRN is a chargeback alert system that helps prevent chargebacks. It works best when used alongside multiple alert providers.

Signing up for each provider can be a hassle. We simplify the process by offering all providers under one platform.

Try our service today to lower your chargeback rates.

Sources

• [1] Verifi CDRN alerts. Chargebackhit. 12/7/2023.
• [2] CDRN updates. Verifi.
• [3] Increasing Transparency for Recurring Transactions. Mastercard. 2022. PDF.
• [4] What is friendly fraud? Mastercard.