To err is human.
To be confused about what’s on one’s credit card statements — mistaking legit transactions for something fishy — well, that’s human, too.
Card disputes are on the rise, especially with first-party fraud, wherein consumers may not be trying to get out of paying for goods and services, but may genuinely not recognize or understand what’s on their monthly (paper or digital) statements. Last year, credit card transactions were up 26% and over the same timeframe, and as PYMNTS has found, 96% of merchants have dealt with card-related disputes.
Lisa Polter-Tennant, SVP client relations at Verifi; Natalie England, senior risk director at Visa and Andrea Babcock, manager of payment operations for Clarus Commerce told Karen Webster that a self-service approach, which empowers consumers, can solve issues before they become full-fledged problems.
Though card disputes might be chalked up to being a normal part of doing business, the costs and time spent in addressing those disputes can be significant. Fifty percent of merchants surveyed say the costs associated with chargebacks, in which the card-issuing bank reverses a transaction, are the biggest problem they have dealing with cardholder disputes.
As Polter-Tennant noted, first-party fraud has been around for a long, long time — but the reactive nature of those disputes, where merchants address the issue after a charge has been lodged, is giving way to a proactive approach, aided by technologies and collaborations, that can address consumers’ concerns before they ever become formal disputes.
“These transactions are not true fraud … but revolve around disputes or confusion that the consumer does not want to resolve directly with the merchant,” she said.
Babcock noted that as her eCommerce firm has found, a significant number of chargebacks occur well after the consumer/enterprise relationship has been firmly established. In fact, disputes come after about 10 months of a consumers’ steady transactions with the company — and lead to frictions as consumers place calls into company centers or threaten to stop being customers altogether.
In short, data is lacking — and that lack is not just on the part of the consumers. The merchants themselves don’t have enough data on hand, and 1 in 4 merchants tend to “over-identify” first party fraud, while another quarter under-identify that fraud. Taken together, that means that 50% of the time, enterprises are not getting to the bottom of what’s really happening.
Clearly, there’s room for improvement, said the panelists. Polter-Tennant said that before disputes become official, there are opportunities where firms like Verifi can be of aid: Through data transparency (via products like Order Insight) across all parties and where that level of detail can show up on the statements themselves. That data gets granular in scope, detailing the who, what, where, when and how much of it all — and alleviates confusion upfront. The consumer does not have to call the issuer, and a high level of customer service from the merchant remains intact, and chargeback rates can improve by 50 to 70 basis points.
Customers Keep Coming Back
Among the additional benefits: “The customer will continue to come back,” she said.
Elsewhere, enhanced tools such as Rapid Dispute Resolution (RDR) helps merchants set parameters on transactions that will automatically get refunded, in real time, thereby offering another way to sidestep the (costlier) formal dispute process. And, of course, the relationship with the consumer is saved along the way. In addition, 3DS and other authentication protocols can save entire “populations” of transactions from being disputed.
Third-party tools, then, become the way to help preserve and grow the commerce ecosystem, while cementing the direct relationship between individuals and their merchants of choice. Some education is still in order, said Polter-Tennant, to spur merchants to embrace and utilize the tools available to them.
The proactive approach to handling disputes and conflict can be a game-changer in the actual design of products and services. Merchants, said Babcock, would be well served in examining how clear their billing descriptors might be, how much info is being passed along to processors and how collaborative they’re being with issuers and even other merchants to develop best practices.
“Collaboration is among the best ways to solve these problems,” observed Babcock.
Looking ahead, noted England, Visa’s recently announced rules governing disputes will be coming into effect next year and mandate enhanced data exchange between merchants and issuers in order to craft “compelling evidence” in those cases. And in tandem with those new rules, as Polter-Tennant observed, merchants need an end to end strategy governing how they interact with consumers, from point of sale all the way to refunds.
As Babcock told Webster, “The more information you can provide to consumer to solve these issues for themselves, that’s better for everybody in the payments ecosystem.”