Omnichannel Is a Merchant Priority and Fraudster Opportunity

The embrace of omnichannel commerce as the pandemic recedes has brought a “new normal” for merchants, Adam Gunther, senior vice president and chief product officer at Kount, an Equifax Company, told PYMNTS in a recent interview.

“There are new fraud and theft vectors,” he said, as consumers interact with businesses in new ways, especially online. And along the way, disputes and chargebacks have increased as fraudsters continue to try to make off with ill-gotten gains — and inadvertent, friendly fraud has increased too.

Consider, as Gunther recounted, the case (it happens more often than you might think) when a child makes an unauthorized purchase through a parent’s device. Or a would-be thief arrives in the store and tries to pick up a legitimate customer’s order. These wildly divergent scenarios can lead to chargebacks. Elsewhere, card-not-present transactions are becoming firmly entrenched in industries where face-to-face transactions (and real-time verification of a cardholder’s identity at the register) used to be the norm. Grocery is a prime example and home delivery, or, separately, buy online pick up in-store (BOPIS), have opened up new avenues for chargebacks. A damaged carton of eggs may spur a customer not to ask for an exchange or a refund, but instead perform a chargeback.

Varied, Rising Tide of Disputes

Kount, for its part, had seen merchants grapple with these new vectors as consumers are filing disputes for these (and other) varied reasons when not all that long ago, the vast majority of disputes had been registered as a result of real or suspected fraud.

The frictions are compounded by the fact that, as Gunther noted, “we’re seeing a lot of merchants that are new to eCommerce — they may have in the past relied on a brick-and-mortar store … and now they are starting from scratch in doing business this way [online]. And small businesses are the ones that are really without sophisticated protection.”

Against that backdrop, before merchants can even begin to think about recovery and challenging a dispute, they’ve got to understand the chargeback itself. Acting on their own, contended Gunther, no single merchant has the data they need to effectively deal with the sheer volume of chargebacks — let alone contest them successfully. In many cases, merchants may opt not to fight the battle, given the time and investment involved. Chargeback guidelines run to hundreds of pages, and keeping current with those regulations can be daunting. The newest rule changes by the payment networks — Compelling Evidence 3.0 — require a response from the merchant in the pre-dispute phase within seconds.

Power of the Network

But “it’s the power of the network,” he told PYMNTS, “and working with multiple merchants that can be the foundation to recovery.” Data and analytics, he added, are critical to a good chargeback management strategy. A unified, data-driven approach, he said, through Kount’s Pre-Dispute Management solution, helps streamline the process and gives enterprises more visibility into the nature of transactions. Automated solutions help cut down the time spent on responses by 84%. The white-label approach, he said, can help acquirers and payment service providers of all sizes provide the technology their merchant’s need by embedding dispute and chargeback management capabilities within their own solutions (and improve the risk within their own merchant portfolios).

Data and analytics, he said, provide stakeholders with insights that help them pinpoint the challenges to fight and gain recovery of funds — and the source of the chargebacks themselves. A certain marketing campaign, he said, might be bringing in different cohorts of shoppers that are in turn boosting chargebacks, or perhaps a shipping company’s not up to snuff and customer dissatisfaction with delivery is giving rise to chargebacks.

“The decades of experience that are codified into a platform is where we help the most –— and overall, a tech-driven strategy can help boost win rates by 117%,” he said.

As he told PYMNTS, “many merchants are now realizing that with the volume of chargebacks that are happening now, with the change of [compliance] landscape, with the way that buying behavior has changed … ‘if I don’t leverage technology I’ll be missing out on business.’”