Gabe McGloin
Lack of communication and transparency in information can result in bad decisions and negative outcomes – particularly when it comes to transaction disputes.
Consider the following scenario: A customer makes a credit card purchase with a merchant, but the customer doesn’t recognize or remember that transaction later while reviewing their bank statement. The customer suspects the transaction may be fraudulent activity and contacts their issuing bank for clarification. The issuer probably has no information on the transaction and moves forward with filing a chargeback on behalf of their cardholder. Meanwhile, the merchant is left out of this discussion completely. At some point following this customer-issuer exchange, the merchant receives a chargeback notification – after having dispensed the goods or services sold to the customer, and that revenue is now lost. The customer has reclaimed the money they paid, but the merchant’s dispute ratio is impacted by a chargeback.
This negative outcome could have been avoided if the merchant were able to communicate the transaction details when the customer inquired about the purchase. Since customers seldom contact the merchant about unrecognized transactions, and may not even know which merchant to contact, it’s almost impossible for merchants to prevent chargebacks on valid purchases in such a case. In these common scenarios, a little collaboration can go a long way in chargeback prevention.
Fraud Affects Customers and Merchants
Most customers don’t make purchases with the intent of disputing them later on, but in this day and age of omni-channel shopping, it’s easy for customers to lose track of what they bought, where they bought it, and when they bought it. This problem is compounded when family members jointly access e-commerce accounts and share the same credit card used for various services. Cardholders can easily lose visibility on purchases made on their credit card and mistakenly think someone has unauthorized access. As a result, cardholders may be disputing transactions unnecessarily, cluttering the payments ecosystem with false credit card disputes that are really valid transactions.
Friendly Fraud (Chargeback Fraud)
Despite its name, there’s nothing amicable about friendly fraud. In these cases, the customer is disputing a valid transaction that they don’t recognize – or claim they don’t recognize. It is possible that the customer forgot the purchase, or the billing descriptor on their statement isn’t clear. Whatever the reason may be, the customer probably wouldn’t file a payment dispute if only they had the details to recognize it as valid. However, in cases that are virtually impossible to measure, some customers are intentionally challenging a legitimate purchase as fraudulent to regain funds, which is better known as chargeback fraud.
Family Fraud (Familial Fraud)
When a single credit card is shared by multiple family members and/or across multiple services and platforms, then it can be difficult for the actual cardholder to keep track of the purchases made on that card. Parents who attach their credit card to their child’s gaming console or cell phone app store know that unexpected purchases can appear on bank statements.
Buyer’s Remorse
People sometimes make purchases they regret. Perhaps the purchase was an impulse buy or fueled by the excitement around the product or service, which faded fast. Now, the customer wants their money back even though they got what they thought they wanted from the purchase. Unfortunately, filing false credit card disputes based on remorse blurs the line into bounded the territory of intentional fraud.
Informed Customers Help Reduce Disputes
Merchants should always communicate as much purchase information to customers as possible. This communication can include a digital receipt, follow-up email, push notifications, and more. Unfortunately, that information is rarely top of mind when the customer is questioning a transaction that they don’t recognize days, weeks or months later. For this reason, merchants need a way to communicate detailed transaction data to customers at the point of inquiry. Being able to do so can help fight chargebacks at the pre-dispute stage before it escalates to a formal chargeback.
Verifi’s pre-dispute solution, PREVENT, enables merchants to communicate transaction details to customers at the point of first customer inquiry. Featuring Order Insight®, PREVENT facilitates this communication by granting issuers real-time access to detailed merchant business and transaction data. PREVENT works can be effective for any business type or industry, offering delivery of over 160 data fields to merchants to ensure transparency in transaction data. Merchants can communicate details such as the color of a product, the last time a subscription service was used, the device on which a purchase was made, and more.
Communication Is Key
By enabling collaboration between payments stakeholders, PREVENT extends the merchant’s customer service into the issuer call center. And the issuer can now give inquiring customers detailed clarification on confusing transactions. Friendly and family fraud are virtually eliminated, because the cardholder has more detail to recognize the purchases as valid. Now, customers committing intentional chargeback fraud may think twice when the issuer can present to them compelling evidence that the purchases were made by the customer on purpose.
It’s rational to assume that most customers don’t intend to file frivolous disputes, but when customers question a transaction and issuers can’t provide answers, then what recourse do customers have? Verifi offers an alternative chargeback mitigation solution by enabling merchants to be part of the conversation. With PREVENT, merchants have a way to keep serving their customers, saving the sale and preserving the relationship.
For more information on Verifi’s pre-dispute solutions, contact us today.