COVID-19: Business Disruption and Changes
The novel coronavirus pandemic has disrupted people’s lives in dramatic ways around the world. From destabilized supply chains to social distancing orders, people are shifting their behavior to accommodate this new reality. Following shelter-in-place requirements, many businesses have embraced remote collaboration technology, like Zoom and Microsoft Teams, eliminating the need for travel. And with concert venues, sports arenas, amusement parks, retail centers, and more shut down, people are replacing those sources of entertainment and shopping with digital subscription services and ecommerce.
COVID-19 has not just altered human behavior but also major industries. As Q1 earnings for 2020 are being released, at least one major airline has reported a loss of 1.7 billion dollars in the first quarter. Similarly, major credit cards are reporting a significant drop in travel spending with one major brand showing figures plummeting 99% in April. Meanwhile, consumers are spending record amounts on digital services, like mobile apps.
As spending behavior changes, it’s important for sellers, issuers, and acquirers to be prepared for new dispute vectors.
Impact on the Payment Ecosystem
Early observation of some business verticals, like online entertainment and gaming, indicates a significant increase in transactions. Year-over-year spend on gaming hardware grew by 63% while gaming software also experienced a healthy 34% increase YoY. Generally, however, an increase in purchasing is followed by an increase in disputes. Given disputes can be filed up to 120 days after the transaction, the results of this increase may not be seen until 4 months from now.
Conversely, other verticals are experiencing a significant increase in disputes currently, such as the travel and hospitality industries. Many consumers who have planned and paid for excursions in advance are either demanding refunds or disputing them outright. But these are not the only affected industries. Pre-paid or subscription-based businesses like gyms and summer camps are considered “non-essential,” which prevents them from delivering the goods or services for which customers have already paid.
Another challenge that sellers, issuers, and acquirers are facing is a lack of resources to combat the spike in disputes. The necessary personnel to help manage transaction inquiries, credits, and/or representments may not be available due to working from home, furlough, or layoff. In those situations, it’s important to have a partnership with a payment service provider with the capacity to manage the dispute volume.
Seller Best Practices
The best way to manage disputes is to prevent an inquiry from escalating. Here are three tactics sellers can employ:
Clear Customer Communications: Ensure clarity in transaction receipts, terms and conditions, and customer correspondence. This will limit the disputes caused by customer confusion.
Proactive Customer Service: Inform customers promptly of any issues that may impact your ability to deliver goods or services for which they have already paid. Informed customers may decide to wait additional time for a needed product or service as long as the timeframe is clear. Uninformed customers may simply dispute their purchases. In addition, consider extending response time for returns (e.g. from 10 days to 30 days), as well as proactively communicating changes on return/refund and T&C policies. In the end, the more informed your customers are, the more likely they will be to reward you with their loyalty.
Picking the Right Battle: It takes time to respond to disputes. That time could be better spent achieving business objectives. Depending on the volume of disputes, sellers must decide which disputes are worth challenging and which ones are easier to just credit.
Verifi Solutions Help Mitigate Increasing Dispute Volume
- PREVENT: This global network enables sellers to share customer support contact information and transaction data directly with issuers to help deflect disputes. This information can help customers remember their transaction.
- RESOLVE: This service enables sellers to resolve disputes before they are filed by the issuer. Issuers on the network will direct confirmed customer disputes to sellers, providing the seller up to 72 hours to act on how best to resolve the dispute. Launching in July, RESOLVE will include Visa’s new Rapid Dispute Resolution (RDR), which resolves disputes automatically via a robust decision engine with rules set by the seller.
- RECOVER: For 15 years, Verifi has been the leader in dispute representment. Our team of specialists provide world-class service, performing all the work on behalf of our seller partners, determining the best approach to suit your business needs and maximize revenue recovery.
Verifi’s and Visa’s Response to Minimize Impacts
Verifi and Visa teams have built initiatives and programs to help all involved in the dispute ecosystem manage disputes, minimize revenue losses, and maintain optimal customer experience.
Visa COVID-19 Dispute Monitoring Program
On April 1, 2020, Visa created the COVID-19 Dispute Monitoring Program. This program was launched with the purpose of reducing invalid disputes from entering the ecosystem. This includes failing to provide a detailed description of the services/merchandise purchased or processing a dispute without attempting to resolve directly with the merchant (unless prohibited by local law). This initiative states that Visa will monitor issuer volumes of disputes raised with sellers. The initiative also outlines that Visa will step in if too many illegitimate disputes are being filed.
Verifi Seller Directory
At the beginning of April 2020, the Verifi Seller Directory was created and made available to Visa issuers to help mitigate customer disputes. Access to seller contact details, refund & return policies, company statement on COVID-19, frequently asked questions (FAQs) and more inform issuers to help mitigate disputes with the customer, or provide seller contact information for the customer to enable direct resolution.
The disruption caused by COVID-19 is far from over; however, some companies in the travel industry are reporting that their dispute volume is leveling off while at least one company in a different industry has reported a 40% decrease in recent dispute volume. It’s too early to tell what this data signifies. Has the payments ecosystem reached the downward curve of disputes? Is this dip in disputes simply a leading indicator of a spike in pre-arbitration or arbitration cases? Time will tell.
The longer shelter-in-place orders are enforced and non-essential businesses are prevented from operating, an increase in dispute volume should be expected. Most likely, this will be due to rising unemployment and decreased cardholder spending power. VOD and mobile apps and services could be the next hotspot for disputes in the near future.
On a long enough timeline, the artificial consumer behavior driven by COVID-19 mitigation practices will become habit. As companies trust their employees more to work remotely and people sheltered-in-place come to rely on food delivery services, the world may never return completely to its pre-COVID-19 state. As pandemic mitigation efforts continue, the payments ecosystem should accept this reality as the new normal.
The Verifi Commitment
While COVID-19 is a health crisis, it’s also causing a payments industry crisis by way of increased disputes volume. Verifi supports sellers impacted by this crisis by connecting them with issuers to share transactional data that can help prevent a dispute before it’s escalated. Verifi also empowers sellers to resolve disputes by issuing credits instead of accepting a chargeback. Finally, Verifi helps recover lost revenue by fighting chargebacks with expert representment services. Verifi is committed to helping its clients and partners survive and thrive during these extraordinary times by providing new insights, information, and expert industry predictions.
Check back soon for part two of this ongoing blog series.