NEW DATA: The Impact Of Transaction Declines And Disputes On The Consumer-Merchant Relationship

Consumers love how easy it is to use credit cards to make purchases, but hate how hard it can be to dispute a transaction. In the Credit Card Frictions Report, PYMNTS surveyed over 2,000 consumers to examine how frictions such as card disputes and declines affect users’ perceptions of merchants, issuers and networks — in ways both good and bad.

The COVID-19 pandemic has prompted a significant share of consumers to change the ways they shop, with nearly half now turning to digital channels for day-to-day purchases. This shift in buying behavior is likely here to stay, too, leading more customers to use card-based payments to complete their purchases when shopping online. This credit card use can certainly make for smoother shopping experiences, but it can also leave consumers vulnerable to various fraud risks, which can ultimately result in declined transactions or disputed charges.

This is the focus of The Credit Card Frictions Report: How Transaction Disputes And Declines Impact The Consumer-Merchant Relationship, a PYMNTS and PAAY collaboration. The report — which is based on a survey of more than 2,000 United States consumers who engage in online shopping — focuses on how frictions associated with credit card use affect consumers’ opinions of the parties involved in each transaction.

PYMNTS’ survey reveals that credit card transaction declines and disputes are fairly common, with 21 percent of consumers having disputed at least one charge over the past three months and 13.5 percent seeing at least one of their transactions declined during the same time frame. These frictions tend to have varying effects on consumers’ perceptions of the entities involved in their transactions, whether they be merchants, issuing banks or card networks. Most declines are triggered by banks verifying the legitimacy of transactions or consumers exceeding their credit limits. This results in consumers witnessing declines as a positive friction that promotes effective fraud prevention, thereby fostering positive or neutral views from customers regarding the parties involved.

However, consumers consider transaction disputes to be a radically different phenomenon. Three-quarters say that their disputes were triggered by mistakes for which most blamed merchants, such as being charged for purchases they did not make or not receiving the goods they ordered. Such disputes led 27 percent of respondents to view the merchants involved in their transactions in a more negative light, regardless of whether consumers were satisfied with the outcomes of their disputes.

These are only some of the findings of our research. Download the report to learn more about how declines and transactions affect consumers’ perceptions of merchants, issuing banks and card networks.