The numbers don’t lie. Chargebacks are a $31 billion problem that hurts merchants, issuers, and consumers. But it is solvable if merchants and issuers take the necessary steps to make a change.
The groundbreaking Verifi-sponsored Javelin Strategy & Research report, The Chargeback Triangle, digs deep to reveal the real chargeback issues and offers recommendations to address the broken chargeback process.
The data in The Chargeback Triangle is based on a 2017 online survey of 2,000 U.S. consumers, 300 executives influencing chargeback policy at U.S. merchants earning $10 million and greater in revenue, and 200 executives influencing chargeback policy at card-issuing U.S. retail financial institutions.
The report builds upon these industry facts:
- Merchants bear two-thirds of chargeback costs at $19 billion
- Issuers absorb the remaining $12 billion in chargeback costs, which includes $7.1 billion in liability
- 45% of consumers disputed a transaction in 2017
- The real chargeback cost is that for every $1 disputed, merchants and issuers incur an additional $1.50 in expense
Compounding these figures are the long-term losses that result from an erosion of consumer brand loyalty, particularly for the merchant. Research confirms that regardless of the chargeback dispute outcome, more than half of consumers (56%) hold the merchant responsible for the dispute.
Fixing the outdated and inefficient chargeback system requires a new approach that relies heavily on merchant-issuer-consumer communication, collaboration, and data-sharing.
Merchant-Issuer Collaboration for Chargeback Prevention
Addressing the challenges inherent in the chargeback system demands a coordinated effort among merchants, issuers, and consumers to form what has been coined as the Chargeback Triangle.
When merchants and issuers work together to share dispute, transaction, consumer, and other relevant data, they can preempt and eliminate the costly burden of the formal chargeback dispute process.
When consumers contact the merchant first to discuss problems with their transaction, order, or delivery, merchants have a much better chance to resolve a problem before it becomes a chargeback.
By taking small steps to share detailed data on a timely basis, merchants and issuers can address consumer confusion and prevent chargebacks.
Advanced payment solutions that enable better consumer information and ease-of-communication between merchants and issuers are powerful tools to prevent chargebacks.
- Connect merchants and customers. Most non-fraud disputes are a result of consumer confusion. The Chargeback Triangle report reveals that merchants are more effective than issuers at engaging with cardholders when there are problems with the delivery of a good or service.
- Better transaction information. Consumers file chargebacks when they don’t recognize or remember a transaction. Merchants need to provide complete billing descriptor information and contact information for each transaction, such as in a digital receipt.
- Less pressure on issuers. Information-sharing between merchants and issuers eases issuer liability burdens by providing them the information they need to help their cardholders resolve transaction queries in a single communication.
- End the information void. Data-sharing between merchants and issuers enables both to make more informed decisions about which dispute to respond to and manage.
- Customer interaction. When filing a dispute, the customer wants resolution without being overwhelmed with information.
At the end of a lengthy chargeback dispute, the merchant and issuer lose valuable brand currency with the consumer due to frustration with the complex and outdated process.
How to Make Chargeback Collaboration A Reality
True collaboration is possible when merchants and issuers use the technologies available to them to change the broken chargeback process. This change in how merchants and issuers work must be a two-way street. It’s up to merchants and issuers to work together to connect the chargeback triangle.
Contact us to learn how Verifi can provide you the tools you need to make collaboration on chargeback management a reality.