Why Small Businesses Outperform Larger Rivals in Preventing Disputes

Ninety-three percent of businesses generating between $20 million to $100 million in annual sales — the smallest category PYMNTS surveyed — use third-party tools to resolve disputed card transactions. PYMNTS’ data shows that third-party tools give these businesses an advantage over larger companies that only use the tools they build themselves.

Despite this reality, many large companies prefer to use proprietary tools for resolving these disputes.

For “Dispute-Prevention Solutions: Small Firms Demonstrate The Power Of Third-Party Tools,” a PYMNTS and Verifi collaboration, we surveyed 301 merchants that generated revenue from web-based and mobile apps in four business categories — retail, entertainment and gaming, travel and leisure, and digital subscription services.

Findings in the report include:

• Among merchants with more than $1 billion in yearly sales, 42% say they experienced customer disputes with card payments. The portion of merchants that must contend with customer disputes is somewhat consistent across all the size categories and industries PYMNTS surveyed, demonstrating that businesses of all sizes and sectors must contend with disputed card transactions.

• Nearly all businesses — 98% — are familiar with at least two third-party dispute-management tools. But this widespread awareness is not enough to persuade some large businesses that they could do a better job resolving disputed card transactions if they used third-party dispute-resolution tools instead of in-house platforms.

• Although third-party dispute management systems are objectively more effective than in-house options, 45% of companies using in-house systems say their dispute management tools are very or extremely effective, greater than the 36% of companies that use third-party solutions and believe their systems are highly effective. This means that there are major misconceptions, as PYMNTS’ data shows that third-party tools are more effective than large companies’ in-house tools at reducing disputed card transactions and the revenue lost to transaction disputes.

PYMNTS’ data makes clear that merchants across all ranges of size must contend with disputed card transactions, and they are well-acquainted with the tools that are available to resolve these disputes. While larger companies prefer to develop their dispute-resolution tools in-house, smaller merchants that rely on what they can purchase from third parties are clearly getting better results in reducing their losses from disputed transactions.

To learn more about how merchants use — and should employ — third-party dispute-resolution tools, download the report.