It is important to seek new ways to minimize credit card chargebacks and increase the availability of data. The most cost-effective way to do so is to ensure a steady stream of data is available to enable all parties involved to have the same information needed and at the time they need it most.
Traditionally, purchasing data is left in merchants’ systems, leaving the issuer little choice other than to issue a consumer’s inquiry about an item on a billing statement chargeback or file the inquiry as fraud. Because there often isn’t enough data sharing between the merchant, issuer and the cardholder, the process becomes more confusion and convoluted. That creates extra friction, and plenty of pain for those involved in the process.
Beyond that, as many as 86% of cardholders will call the issuer and bypass the merchant entirely to dispute a charge. This leaves the resolution left in the issuer’s hands and leaves little for the merchant to do. What this then leads to, by default, is lost revenue and lost customers, which can hurt brand reputation.
Merchants don’t have the opportunity to address cardholder issues directly and issuers don’t have the information they need to resolve confusion, so the merchant is stuck in a race to the refund. When merchants receive a chargeback notice, it is often too late to salvage the customer or resolve the issue. Less-than-efficient dispute resolution procedures can hurt cardholder satisfaction, damaging the merchant’s brand and contributing to lost customers and profit leakage. This has a trickle-down effect on merchants, who typically do not come out on top of disputes.
Instead, what solves those pain points is these data-sharing platforms that can provide merchants and issuers with the specific order details they need to help resolve disputes before they become costly chargebacks (device used to make the purchase, a complete description of the product/service, location of the purchase, prior dispute history, etc.), generate compelling evidence to support the legitimacy of the sale and reduce profit leakage and “double dipping,” or acquiring a second refund from the merchant who might not have otherwise known any better.
With real-time visibility on the customer outcome, this can help resolve disputes faster and prevent further chargebacks from occurring. This also enables real-time collaboration between merchants, and issuers to manage the chargeback process. With the proper data available, those pain points and friction between parties can be avoided, leaving less chance that a purchase is flagged as fraud when it fact it was a legitimate purchase.
By facilitating collaboration amongst the customer, merchant and issuer, the major pain points on each side of the transaction lifecycle can be better addressed in a way that benefits each party involved - faster, cheaper and more effectively. By providing the cardholder and issuer with more detailed purchasing information from the merchant it decreases the chance a customer would file an accidental chargeback - which is one of the major reasons fraudulent chargebacks (friendly fraud) are filed. With better ability to identify and reduce fraud, friendly fraud and chargebacks, cardholder, merchant and issuer collaboration is enhanced and enables purchase details to be shared with the cardholder upon inquiry.
And the benefits trickle down from there, which include: avoiding unnecessary chargeback fees, fines and operational drain researching/resolving disputes that could have been addressed without escalation; compelling evidence requirements with the issuer to prevent disputes from becoming a chargeback; removes cardholder confusion by validating the purchase with details designed to increase customer awareness of the purchase.
It’s also important to analyze data for chargeback risks, which means identifying the high-value items that are frequently targeted by fraudsters (gift cards, electronics, etc.) and determining what sort of processes need to be in place to spot and mitigate those fraud risks. This also means being able to identify data in order to better understands fraud patterns so your full risk can be fully assessed and prevented in the future.
After all, fraud and risk management should be a priority for every merchant. Luckily, today, a business can implement all of the best practices mentioned above and have a full-strength chargeback recovery program. Protecting against thieves or unscrupulous customers requires a solid strategy for recovering funds lost to the chargeback process and preventing them from occurring in the future.
