How to Reduce the Chargeback Burden on Merchants


For merchants, effective communication is the key to successful, ongoing relations with their client base. Whether it’s staying active with customer emails, clear website product descriptions, visible refund and return policies, or simply sharing purchase information with issuers – good communication is critical.
When it comes to consumer disputes, the numbers tell us what happens without solid communication. We get a broken chargeback process – which in 2017 cost the payments industry $31 billion. These losses can be reduced and even prevented if merchants and issuers collaborate in a well-informed and timely fashion.
For too long, merchants and issuers have been at opposite ends of the chargeback spectrum, resulting in a broken dispute and chargeback system. However, advances in data collection and sharing, instant communication, and remote collaboration technologies present opportunities to improve the process significantly.
The burden placed on merchants is far too great for this cycle to continue without damaging effects to business inception and growth. As it is evidenced in the Verifi-sponsored Javelin study, The Chargeback Triangle, there must be manageable, collaborative solutions implemented to reduce the burden placed on merchants.
In October 2017, Javelin conducted an 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. This research informed the foundation of The Chargeback Triangle, providing many illuminating facts on how and why it’s time for merchants and issuers to collaborate to radically change the chargeback process for the better.
The Chargeback Burden
The numbers highlighted throughout The Chargeback Triangle reveal hard truths about the impact chargebacks have on merchants.

  • In 2017, merchants bore nearly two-thirds of the cost of chargebacks.
  • 60% of merchants’ chargeback-related costs arise from chargeback management expenditures, rather than liability.
  • For every dollar in disputed transactions, an additional $1.50 is spent on fees, management expenses – including technology, outsourcing, and personnel.

The Chargeback Triangle research study concludes that the most effective way to prevent chargebacks is with timely communication between merchants, issuers, and consumers.
This communication triangle could enable merchants and issuers to reduce liability and build strong relationships with consumers, by solving disputes before they escalate into chargebacks. Consumers will benefit by resolving their concerns over questioned transactions with little or no friction or frustration – enhancing their confidence in both the merchant and the issuer.
Reducing the Chargeback Burden on Merchants
Progress begins by employing technologies and payment protection solutions that foster seamless collaboration to stimulate the changes that can reduce the burden on merchants.
Results are achieved when every party in the chargeback triangle has access to information, feels supported, knows whom to contact, and has confidence in payments innovations to resolve disputes efficiently. The same technologies that enable instant credit card verification, IP address analysis, m-commerce, in-app purchases, and delivery tracking can be the catalyst for solutions that help deliver a much-improved chargeback process. Such an innovative solution makes it possible for merchants and issuers to share consumer and purchase information so that consumers can self-resolve disputes, interact with a more informed issuer, and communicate directly with the merchant.
To learn more about how Verifi can help you make collaboration a reality within your organization, contact us today.