Data-Sharing Helps Merchants and Issuers Stop Chargebacks

In more than 8 in 10 cases, when consumers contact the merchant first to dispute a charge, it is resolved before it becomes a chargeback. This finding from the recent Javelin Strategy & Research report, “The Chargeback Triangle,” should be encouraging to any merchant that deals with chargebacks. But compare  with another finding from that same report: customers bypassed merchants and went directly to their issuer in 76% of cases. Invariably, issuers do not have enough information to resolve disputes and prevent them from becoming chargebacks.
Merchants and issuers generally agree that chargebacks are bad for business. The difference is how each defines “bad for business.”
The Merchant Viewpoint
Customers typically blame the merchant when there is an issue with a transaction. Merchants are best fit to resolve issues their customers are experiencing, but they’re often left out of the loop. Whether it’s confirmation that a shipment was delivered, the proof of customer identity or authorization at time of purchase, or something far less innocent, the merchant usually has the information needed either to clear up confusion, uncover friendly fraud, or stop first-party fraud in its tracks.
Motivated to avoid losing a sale or incurring chargeback fees, the merchant is more than willing to take the time to resolve the dispute. But if they don’t know about the dispute because the customer contacted the issuer first, they only learn about the problem when they see it as a chargeback.
Most non-fraud disputes are the result of customer confusion – which merchants can address easily when there are problems with the delivery of a good or service. Simple inquiries as such are often brought straight to the issuer, who lacks pertinent information to properly resolve.
The Issuer’s Perspective
The main mission of the issuer is to resolve the customer dispute quickly. As The Chargeback Triangle points out, the longer it takes to resolve a dispute, the more likely it is for the customer to stop using the issuer’s card and replace it with a competitor’s. Now, that’s bad for business. Because issuers have little information about the transaction, including the merchant’s contact information, the tendency is to offer a provisional refund and initiate a chargeback. In many cases, issuers choose to write off small-balance disputes and absorb that cost, all in the spirit of ensuring customer satisfaction and loyalty.
Working Together to Achieve a Shared Goal
Because of their conflicting positions on how to deal with disputes, merchant-issuer collaboration does not come naturally. But when you break down the cooperation needed to its most basic form, it is easily achievable and even painless for both parties.
At its very core, collaboration is all about data-sharing. Whether this involves customer and transaction information provided by the merchant for the issuer’s customer support team to access at the time of a customer inquiry, or “compelling evidence” on demand to prevent filing an unnecessary chargeback, data must be available during key points in the dispute process. Data-sharing can also extend to customers through banks’ online and mobile statements – with full transaction and merchant data promoted – eliminating confusion by keeping customers fully informed about their transactions.
What to Look for In Data-Sharing Solutions
The most effective data-sharing solutions:

  • Feature an open channel for data-sharing as well as direct communication. Data must be easily accessible to ensure timely responses to inquiries.
  • Deliver a real-time data exchange. If the data is not current, it can be difficult to make informed decisions.
  • Include order details, such as product name or service purchased, merchant name and contact information, shipping details, customer transaction and dispute history.

Greater cooperation between merchants and issuers is the key to reducing the number of chargebacks and their associated costs. Contact us to learn how collaboration solutions can help facilitate data-sharing to resolve disputes at customer inquiry and prevent chargebacks.