The Biblical narrative of the Tower of Babel was meant to explain why people throughout the world speak different languages, but in the modern-day payments version it apparently applies to the complex and problem-ridden transaction chargeback process.
Because merchants, card networks, issuers and acquirers all deal with different data sets and explanations for consumer chargeback requests, it is akin to not everyone being remotely on the same page.
"What we really have, which has to be solved, is as if acquirers speak French, card associations speak Chinese, issuers speak Spanish and merchants maybe speak English," said
Even before the coronavirus pandemic led to an avalanche of online and mobile shopping that, in turn, has led to more chargebacks, Eaton-Cardone said her company was at work in developing a platform for financial institutions that would operate in the same manner, but with more features, as the Chargebacks911 cloud-based platform for merchants.
It has led to the launch of a new brand for the company, the Fi911 platform for automated chargeback management and related activities, such as payouts to ISOs after a dispute settlement. It will also include artificial intelligence-powered merchant onboarding, post-transaction monitoring, lifecycle management and reconciliation services. Mostly, it provides increased insight into the process so that all parties are dealing with the same data, dispute coding and consumer explanations.
"The financial institution should be using the same information that the merchant is taking into account for chargebacks and use the same information for monitoring their transactions and for risk management," Eaton-Cardone said. "Today, an acquirer may be paying five different companies with 20 different legacy solutions and, with all of these siloed processes, they end up creating costs and reducing efficiencies."
Even worse, she added, it all reduces the amount of intelligence at hand, which makes it difficult to make good business decisions. "Thus, the whole premise is to really create efficiency," Eaton-Cardone said. "It's almost like saying let's bring in blockchain to this environment and we'd have higher compliance and better management at a reduced cost."
The Fi911 rebrand represents the potential for banks to either upgrade legacy systems over time, or operate the cloud services on top of long-time networks.
"The legacy world isn't going to put behind us anytime soon, even though if you ask both merchants and FIs, a lot of them would say it's generally broken," said David Mattei, analyst at Aite Group in fraud and AML. "You make it work because you have no choice but to make it work, and that's what they do; but It's generally not a good situation."
Legacy systems often bog down a process in terms of getting the cardholder explanation, putting a proper dispute code on it, moving that information to the card networks, issuers and acquirers and, ultimately, to the merchant. During that process, each party gets different amounts of data to work with.
"It goes back to the 1970s and '80s when cards came into vogue and became popular, and they had to put some kind of policy in place for when a cardholder wanted to dispute a transaction," Mattei said.
When card fraud took off in the 1990s and exploded in the 2000s with breaches, banks were regulated for a formal process, being Reg E for debit and Reg C for credit.
"Banks don't like it because of the costs associated with dealing with this," Mattei said.
But handling chargeback disputes and attempting to streamline the process is not foreign to the industry. Many wheels have been put in motion to address this costly and time-consuming process.
Visa and Mastercard have established processes to soften the blow of chargebacks and to spot fraud. But the complexity of the process wasn't lifted, especially when a cardholder initiated the dispute and a bank employee had to determine how to code it and fit it properly into the chargeback system.
"Chargebacks911 has been in this space for quite some time and cut their teeth on the merchant side, so it was a natural extension to do the same on the financial institution side," Mattei said.
The card brands, with
"It's kind of like an early warning system," said Tim Sloane, director of emerging technologies advisory services for Boston-based Mercator Advisory Group. "Some other fraud prevention platforms have also integrated into the card network implementations to offer merchants help with 'friendly' fraud."
Others have gone further in selling fraud detection platforms to issuers so issuer data and merchant data can be added to the consortium data maintained in the cloud, Sloane added. "This goes beyond friendly fraud to authenticate cardholders at checkout and look for other potential fraud vectors."
Most recently,
It all points to an increasingly crowded field seeking ways to address one of the more harmful processes for every player in the payments ecosystem.
"We were one of the first chargeback management companies, and we've actually been doing business with financial institutions for five years, but as we have grown we saw that our solutions are all interconnected," Eaton-Cardone said.
Eaton-Cardone sees the Fi911 launch coming at a perfect time, as merchants struggle with various aspects on COVID-19, not the least of which is being new to the e-commerce game.
"What is happening is you have merchants with no experience in the card-not-present market, and they were doing a pre-authorization on every single transaction," she said. "They do it for $30, but a hamburger actually costs $10, so you have a chargeback on your hands from the consumer."
Any card-not-present merchant would agree "there is no such thing as a rulebook on how to make sure all of this works," Eaton-Cardone said. "There are best practices, but they are not always applicable or practical."
Thus, all the more need for merchants, acquirers and banks to be on the same page — and speaking the same language — when it comes to chargebacks.
