In 1974, the Fair Credit Billing Act was enacted to protect consumers from prejudicial or unfair billing practices. Over 40 years later, this act still has a profound impact on how merchants and issuers manage chargeback process.
History reminds us that the Fair Credit Billing Act was created to provide credit card users with protection from credit card fraud and theft. Fears over credit card fraud were so high that the federal government introduced this legislation to give consumers confidence that they were protected.
Since the introduction of the Act, consumer commerce has changed dramatically.  Unfortunately, chargeback management, fraud detection, and fraud prevention have been slow to evolve because merchants and issuers operate in a vacuum.
There is virtually no communication or information exchange between merchants and issuers, despite the relevant data needed to address resolving disputes being readily available. Tools that enable regular collaboration have been introduced, yet merchants and issuers have been slow to adopt and are paying the price – to the tune of $31 billion in chargebacks in 2017.
The hard truth is that the volume of chargebacks and associated costs increases every year.  Friendly fraud remains an ongoing threat, as both consumers and fraudsters have figured out how to manipulate the chargeback system.
Changing Chargeback Communication Strategies
To reverse these trends, merchants and issuers must understand that they need to work together by sharing data, improving communication, and embracing collaboration.
Merchants and issuers can change how they manage chargebacks by taking several steps.

  • Early intervention. Merchants and issuers need to have tools and policies in place to respond quickly to a transaction dispute. The more time that is lost, the more likely a dispute will devolve into a chargeback.
  • Clear communication. Merchants must incorporate best business practices, including clear billing information, websites with accurate product descriptions, accessible refund/return policies, and customer service availability. Issuers should use simple language to keep customers informed throughout the dispute resolution process.
  • IT infrastructure. Merchants and issuers must keep their fraud detection and prevention technology current. This includes AVS, 3-D Secure, tokenization, IP intelligence, biometrics, device intelligence, and SSL.
  • Accurate data storage. Merchants and issuers must adhere to the highest data security standards and policies to protect their customers as well as their own databases from hacking and other cybercrime.

The Path to Collaboration Between Merchants and Issuers
Collaboration and a true partnership between the merchant and issuer are the keys to victory in the battle against chargebacks:

  • Create an information-sharing infrastructure.
  • Invest in the technology and tools that enable data-sharing.
  • Build a new process for handling disputes through collaboration. That means issuers directing consumers to get in touch with merchants, or merchants arming issuers with transaction details to resolve disputes quickly and prevent unnecessary chargebacks.
  • Empower customer service with the right training, information, and tools to respond quickly to transaction disputes.
  • Know what works and what doesn’t work – be ready to adapt to change.

Change is not easy, but you don’t have to tackle it on your own. The Verifi team has the focus and expertise to make the changes you need to prevent chargebacks and protect your revenue. Contact us to learn how we can provide the strategy and tools to make data-sharing and collaboration a reality.


The merchant-customer relationship appears simple in theory. Provide your best service and products, and invite them to come back for more. However, even the simplest of relationships can become complex and fraught with confusion, often materializing as friendly fraud, disputes, and chargebacks, resulting in loss of customers and future business.
Add the issuer into the mix and the merchant and customer relationship can devolve into a dysfunctional triangle of three parties working against each other to resolve a transaction dispute.
What Customers Want
Customers want every aspect of their online shopping experience to be easy. What was once a novelty or costly VIP experience has become a common expectation. That’s why customers are quick to part from a new merchant at the first sign of complication they encounter at any point during the entire transaction process. Here’s a short list of customer expectations:

  • Convenience. One-click or swipe purchase functionality, immediate payment verification, and the ability to buy anywhere at any time.
  • Security. Secure checkout options, stored passwords, and instant credential verification.
  • Confidence. Comfort in knowing the merchant has the process in place to make shopping easy and that they are protected from fraud.
  • Simplicity. A consumer-friendly website, multiple payment options, and an outstanding app or mobile experience.
  • Service. 24/7 customer service, including timely shipping and delivery information. Fast responses to email communication and purchase inquiries.

Delivering what customers want is certainly not easy. Factor in that the evolving omnichannel marketing and payment environment comes with risks – including chargebacks, cybercrime, and friendly fraud – and the merchant’s job gets even harder. 
Why Chargebacks Are Still a Problem
It all comes down to data. While merchant databases are packed with robust customer and transaction information, that data is either vulnerable to fraudsters or underutilized by merchants in the fight against chargebacks.
Merchants and issuers do not have to accept the growing chargeback problem, because they have tools available to manage disputes much more effectively.

  • Communication. Merchants and issuers need to communicate. When a customer disputes a charge, issuers need to act quickly. Merchants must be willing to share transaction details with the issuer, so they have the information on hand to resolve the dispute before it escalates to a chargeback.
  • Compelling evidence. The most effective way to address a transaction dispute is with compelling evidence. Make sure you know where and how your data is stored, and have a system in place for easy access to achieve a successful chargeback representment.
  • Effective business practices. This includes purchase confirmation emails, clear billing descriptors, detailed refund/return policies, updated website product descriptions, tracking/delivery information, etc.
  • Resources. Give issuers the information they need to put customers in touch with your customer service team. In more than 8 in 10 cases, contacting the merchant first prevents a chargeback.

Keeping consumers happy is an ongoing challenge that begins and continues with excellent communication throughout the entire purchasing experience. When you help ensure that the right people have the right information at the right time, you can resolve a simple transaction dispute before it becomes a chargeback. Do this well and you can turn a potentially brand damaging experience into a brand building opportunity.


When assessing the damages that result from transaction disputes, the focus typically is on merchants. After all, in 2017, they absorbed $19 billion in chargeback costs. However, issuers have been similarly affected, having shouldered $12 billion of the burden.
Issuers face a losing battle balancing the demands placed on them by federal regulators, credit card associations, merchants, and cardholders. They must somehow manage to satisfy the needs of many parties that are not always in sync, while protecting their own interests.
Issuer Pressures with Transaction Disputes
The 2018 Javelin Strategy & Research report, “The Chargeback Triangle,” reveals that $7.1 of the $12.1 billion costs incurred by issuers are from the combined liability of credit, debit, and prepaid card chargebacks.
These costs are directly related to the issuer’s regulatory responsibility to protect consumer rights during transaction disputes. The intent of these regulations is to protect cardholders from credit fraud, but the antiquated dispute management system has greatly driven up issuer expenses.
Underscoring the entire chargeback process are the constricting challenges applied to issuers by federal and credit card association regulations. Challenged to meet the demands of all requirements, issuer customer service personnel are ill-equipped to manage transaction disputes efficiently and cost-effectively – for their cardholders as well as the financial institution itself.
Either they don’t have transaction information available to sufficiently respond to customer inquiries, or they are unable to involve the merchants early in the process to prevent unnecessary chargebacks. This results in an increase in the number of fraud cases, as well as costly chargebacks.
An Overview of Regulations Z and E
The Federal Reserve created Regulations Z and E in part to protect credit and debit cardholders. While these two regulations are quite extensive and broad-ranging, it’s important for issuers to understand their implications and adhere to the rules in the context of the transaction dispute process.

  • Regulation Z. Commonly known as the Truth in Lending Act, the intent is to provide protection for and honest treatment of credit cardholders. Sections 226.12(b)(3) and 226.13(c)(2) deal specifically with the transaction dispute and chargeback processes – defining strict regulations on how issuers must respond to transaction disputes.
  • Regulation E. Commonly known as the Electronic Funds Transfer (EFT) Act, the intent is to provide guidelines on how cardholders should be protected when using automated teller machines, point-of-sale transactions, and automated clearing house systems. Specific to the transaction dispute process are the rules around consumer liability for fraudulent or unauthorized credit and debit card charges.

Issuers are bound by these key regulations and those defined by the credit card associations. Highly trained personnel must respond to cardholder disputes, while ensuring compliance with regulations.
Merchant Collaboration to Reduce Issuer Challenges
Issuers have come to understand that collaborating with merchants and acquirers is critical to reducing their liability. When issuers have the information needed to identify valid sales and fraudulent disputes quickly, they can reduce operational costs and their chargeback volume. This can be achieved by taking advantage of technological solutions designed specifically to enable merchant-issuer collaboration.
Contact Verifi to learn about solutions that facilitate merchant-issuer collaboration, which can help decrease dispute volume and improve the customer experience.


The payments ecosystem has evolved significantly over recent years. The rise in m-commerce, in-app purchases, same-day delivery, and subscription options has created an impersonal and disconnected relationship between consumers and merchants. This has had a two-fold impact on disputed transactions: consumers often don’t know who to contact when they have transaction disputes or inquiries, and it has become easier for consumers to commit friendly fraud.
When a consumer initiates a dispute, the issuer and the merchant don’t actually work together to determine if the problem with the transaction is either fraud or theft, leaving them at a significant disadvantage. When they collaborate, the dynamic shifts, giving merchants and issuers the ability to prevent fraud and unnecessary chargebacks.
Just as merchants and issuers have evolved to meet the needs of consumers who have embraced omnichannel marketing and digital billing, they also must change how they approach chargeback management. If they don’t adapt, their businesseses will continue to absorb the ever-increasing costs driven by an antiquated chargeback process.
The Power of Transaction Data
In today’s digital age, every click, swipe, tap, like, and comment is captured and saved. This data has become one of the greatest assets for merchants to resolve a dispute before it becomes a chargeback. Examples include:

  • Transaction data. Customer order information, cost, device name/ID, transaction date.
  • Merchant data. Name, address, contact information, refund/return policies, warranty information, and merchant email address.
  • Product data. Product description and image.
  • Customer history. Unique customer data including name, physical address, phone number, email address, IP address, and customer dispute history.
  • CRM data. Includes data such as AVS and CVS details, customer address, copies of all emails and other digital communications, proof of delivery and tracking numbers, purchase medium, and customizable options available.

The Value of Data Sharing
This critical merchant data should not remain the sole domain of the merchant. When shared, it can be a powerful tool in the fight against chargebacks:

  • Allows issuers to make informed decisions. With access to this data, issuers can quickly differentiate valid problems from friendly fraud and stop unnecessary chargebacks.
  • Connects the customer with the merchant. Issuers are typically the first point of contact for the cardholder. With shared data, the issuer can re-direct the customer to the merchant, allowing the merchant to resolve the customer’s problem.
  • Helps build a successful chargeback representment case. Merchants have limited time to respond to a chargeback, and this data is critical in building a successful representment case.
  • Protects brand loyalty. A quick resolution to a customer’s inquiry, provides a positive, simple experience

Collaboration to Fight Friendly Fraud and Chargebacks
When it comes to chargebacks and friendly fraud, the customer usually has the upper hand.  However, when merchants and issuers collaborate by sharing data, the tables are turned.
Friendly fraudsters are caught in the act and honest customers have their problems solved quickly, while the costly and exhaustive chargeback process is avoided. Merchants and issuers save time, money, resources and customers – everyone wins.
to learn more about our merchant-issuer collaboration tools, including Verifi Order Insight, which have been developed to ensure the right parties have the right information at the right time to stop chargebacks and friendly fraud in their tracks.


No one wants to deal with a chargeback or the stress of trying to determine if a dispute is valid or another instance of friendly fraud. So, why do so many merchants and issuers spend endless hours, resources, and dollars independently fighting chargebacks? It’s usually their only option.
Merchants and issuers must collaborate and fight the problem together to drive down chargeback costs.
The Need for Merchant-Issuer Collaboration
In the current chargeback process, the issuer lacks the information needed to make an informed decision about the cardholder dispute, and the merchant is alerted far too late to make a tangible difference.
Consider how collaborating to share data and timely information can help solve the problems created by the outdated chargeback process. The dispute and chargeback system has been in practice for decades with little change, and it wasn’t built with collaboration in mind. Today, innovation toward frictionless purchases and the inherent vulnerabilities in digital purchasing channels, which may not account for potential fraud vulnerabilities prior to deployment, makes collaboration a necessity.
The recent Javelin Strategy & Research Report, “The Chargeback Triangle,” takes a deep dive into the current dispute process and what changes must take place to drive down chargebacks, friendly fraud, and their associated costs.

  • Disputes cannot be the core focus. Merchants and issuers can either devote staff and resources to chargeback management at the expense of core responsibilities, or adopt a strict rules-based approach that can result in the loss of valid sales and customer loyalty. Neither is a sustainable option.
  • Customers have the upper hand. Due to advances in technology that have made in-app purchases, instant home delivery, and other perks of e-commerce a reality, friendly fraud is on the rise. With a simple click, a cardholder can trigger a dispute and get away with a digital form of shoplifting.
  • Issuers are the first point of contact for customers. The customer is conditioned to file a dispute with the issuer, without understanding that contacting the merchant first is the most direct way to solve their problem. The underlying challenge is in connecting the right people, with the right information, at the right time.
  • Merchants have the data but don’t have a chance to use it. In most cases, the merchant can prevent a chargeback because they have transaction details readily available, such as the customer’s shopping history and delivery information. Unfortunately, they are alerted too late in the process to solve the problem.

Merchants and issuers fight the same chargeback battles but use different tools and methodologies. This simply isn’t working.
Sharing Data to Fight Unnecessary Chargebacks
In the current system, merchants and issuers appear to be in opposition, but they both want the same result – a reduction in the number of chargebacks and an end to friendly fraud.
To break down the solution in its most basic form, merchants have the data issuers need to quash unnecessary chargebacks and stop friendly fraud in its tracks. Sharing that information is key to collaboration. Information includes:

  • Complete transaction details. Includes the merchant name, time and place of the transaction, and how the purchase was made.
  • Complete merchant information. Includes the merchant name, address, phone number, refund/return policies, email address, etc.
  • Complete customer details. Includes when the purchase was made, the IP address of purchase device, location of an in-store purchase, type of device used, phone number, email address, dispute history, and transaction history.

This information is exactly what the issuer needs to make a quick, informed decision about the validity of the dispute. With quick access to the merchant’s data, issuers don’t have to guess about the truth behind the dispute claim. In addition, the issuer can easily direct the customer to the merchant, because they know the merchant’s contact information.
The objective for both merchants and issuers is the same – reduce the amount of friendly fraud and unnecessary chargebacks. Collaborative tools such as Order Insight allow merchants and issuers to work together as a unified force to win the battle against chargebacks and fraud.


The transaction dispute problem is not slowing down. In fact, industry experts predict that chargebacks and transaction disputes will get worse before they get better.
This is exactly why issuers must be proactive to avoid the costs, resource drain, and the possible increase in customer attrition caused by unnecessary and fraudulent chargeback disputes.
Due to the increasing adoption of m-commerce and e-commerce purchasing, connection between merchants and consumers is dwindling, which becomes problematic when a consumer has an issue with a purchase. As a result, consumers typically contact the issuer first, either by clicking the Dispute Transaction link on their digital credit card statement or by calling the 1-800 number on the back of their credit card.
Issuers feel pressured to keep their customers happy by helping them as quickly as possible, but the fact is merchants are better equipped to resolve a disputed transaction. However, without a way to connect the merchant and the consumer, the issuer frequently has no recourse but to initiate a chargeback and give the consumer a provisional refund.
The Costs of Chargebacks for Issuers
Up to 76% of the time, consumers bypass the merchant and initiate a dispute with the issuer. In 2017, issuers absorbed $7.1B in liability costs, and this trending figure will increase if the dispute process remains unchanged.
Compounding the costs is the pressure issuers face to meet the requirements placed by regulators to protect consumers. The chargeback process was created over 40 years ago to shield consumers from fraudulent credit card charges, and that process remains in force today. Unfortunately, the dispute process has not kept pace with advancements in the payments industry, which has resulted in a system that can be crippling to merchants’ and issuers’ revenue and customer retention.
Contributing to the costs they shoulder, issuers face several factors that add to the damages caused by chargebacks:

  • Missing Data: Issuers lacks easy access to crucial data pertaining to the queried transaction. Without detailed transaction information, it’s extremely difficult to discern a confused customer from one who is committing fraud. This results in increased losses from fraud and mounting frustration for honest customers subjected to a time-consuming dispute resolution process. Consequently, customers reduce or abandon card usage completely.
  • Resource Drain: Issuers must dedicate added resources – such as personnel, training, new technology – to manage a mounting pend queue of chargebacks. Now, more than ever, it is important to optimize dispute management time, given the new Visa Claims Resolution requirements.
  • Compliance Costs: Issuers face elevated compliance risks, fines or legal actions, increased regulatory scrutiny, and reputational damage when they are not able to resolve a consumer dispute quickly.

Unfortunately, the current chargeback system forces issuers to absorb significant operational costs and revenue loss because they lack the data required to resolve consumer disputes. This creates an unhealthy ecosystem of dissatisfied customers, time-consuming arbitration processes, brand damage, and an increase in small balance write-offs that grow to large losses over time.
How to Change the Chargeback Process
Optimally, the principal players in transaction disputes should work in collaboration to change the current chargeback system. Issuers, merchants, and consumers must be willing to share vital transaction information to help resolve disputes before they become chargebacks. By using a payment solution that fosters true collaboration and data sharing, issuers can reduce chargebacks and avoid the associated resource drain and revenue loss.
To learn how Verifi’s innovative collaboration solutions can help sustain and improve your customer relationships, contact us today.


No one wants to hear about the latest data breach and where it hit. Consumers get very nervous when they’re reminded that their personal data is not secure. The last thing a merchant wants is to be associated with a data breach, and issuers get extremely uncomfortable about what the threat to their deep databases could mean to their customer security and loyalty.
Data security plays an integral role in e-commerce. It should be top-of-mind for consumers, especially for those who frequently shop online and share their data across multiple networks. Consumers need to understand that the cornerstone of data protection is in defining how and with whom they share their data. Merchants must remain vigilant against data breach threats and fraud because when a breach happens, the consumer’s first instinct is to blame them.
Just as consumers are warned not to respond to email requests for their credit card data from dubious or unfamiliar sources, merchants must do their part by taking the necessary steps to protect both consumers and themselves from attacks.
Smart Steps to Protect Customer Data
The merchants that are most successful at preventing attacks are those who stay ahead of criminals with the latest in payments technology, security safeguards, and best business practices.

  • Password security. Merchant payment solutions must require consumers to use passwords that meet advanced security encryption standards and employ multi-factor authentication for deep password security.
  • PCI compliance. PCI compliance aims to protect consumer data during the entire e-commerce transaction. Merchants must adhere to compliance regulations, but also understand that PCI compliance is not a complete data security protection solution.
  • SSL protocol. Select an online payment solution that uses Secure Socket Layer (SSL) to deliver an additional layer of data security. SSL-enabled websites are identified with the HTTPS prefix.
  • Secure customer data. Make sure the customer service team is up-to-date with best practices to protect consumer data. Instruct the customer data team never to give out credit card information, addresses, phone numbers, or passwords unless they can verify the consumer’s identity with security questions before proceeding with discussing their account.
  • Mobile wallet. This frictionless payment technology enables merchants to provide the ease-of-use consumers demand along with a reduced fraud risk. Mobile wallets take advantage of tokenization, replacing all account identifiers with a secure token that represents account information in encrypted form.
  • Stay alert. Remember to audit your payment solution regularly and make sure it is using the latest in multi-layered fraud detection and prevention technology.

Contact Verifi to learn more about how our advanced payment solutions can deliver the protection you need to keep your customers and your own business safe from the ever-present data breach threat.


Chargebacks shouldn’t have to be part of the of the cost of doing business, but for many merchants this is their reality. The payments industry uptick in chargebacks and their associated costs have made it very challenging for merchants to stay true on their path of success.
Because merchants absorb the majority of costs resulting from chargebacks and fraud, it is in their best interest to take action. This means deploying advanced payment solutions, accessing data, and working with issuers to improve and increase resolutions on consumers’ purchase issues.
By continuing the current broken chargeback process, costs will continue to escalate for merchants and issuers. In 2017, chargebacks were a $31 billion problem with $19 billion of the burden falling squarely on merchants. To make matters worse, 63% of consumers ceased merchant patronage after a dispute, which is not a sustainable trend.
Three Key Challenges Facing Merchants
Merchants are in a precarious position when it comes to chargebacks. They typically find out about the dispute too late in the process to take active measures. Merchants face three key challenges within the chargeback process:

  • Accessing all pertinent transaction documentation from a variety of sources and presenting it with issuers or consumers in a timely manner
  • Deciding which disputes are worth contesting
  • Keeping track of dispute timelines and customer histories

Stacking odds against merchant success even higher are the short and long-term impacts on customer retention and lost brand loyalty.
How Chargebacks Cost Merchants
Merchant chargeback liability can include fines and fees, refund costs, recovery of lost merchandise, and the loss of customer loyalty.
Busy merchants typically don’t have the time to understand the breakout of their chargeback costs. Here are the most common charges:

  • Retrieval Requests. The merchant pays a processing fee of $5 – $15 each time an issuer requests an electronic copy of the purchase receipt from the acquirer.
  • Chargeback Fee. Merchants pay up to a $100 acquirer fee for every chargeback, even when the claim is denied.
  • Arbitration Costs. For claims that reach arbitration, the merchant must pay the associated arbitration costs. If the merchant loses the case, they may have to absorb a $500 network fee.
  • Chargeback Penalties. When the merchant’s chargeback ratio exceeds 1% or 1.5% of their total sales volume (depending on multiple card association requirements), they are placed in a chargeback monitoring program. Each subsequent chargeback comes with an additional $100 fee. The ultimate penalty results in the termination of the merchant’s account by the acquirer.
  • Other Fees. Some credit card associations may charge ‘review fees’ for merchants that do not have a transaction dispute reduction plan.

Dollar costs are only one component of the problem. Fraud vulnerabilities and the resulting revenue drain continue to be a threat.

  • Increased Fraud. Merchants frozen out of the early dispute process must play catch up, giving fraudsters more time to commit further criminal acts.
  • Manual Reviews. The manual process required to review disputes is a drain on resources and time.
  • Lost Goods/Services. Merchants frequently do not recover the lost (or stolen) goods or services and associated shipping costs.
  • Lost Consumers and Brand Damage. Consumers have low tolerance for a lengthy dispute process and are quick to abandon merchants.
  • Consumer Experience. A merchant-consumer relationship is almost non-existent in digital sales. This lack of relationship means consumers don’t know who to contact or trust to resolve their dispute, so they typically bypass the merchant and contact the issuer.
  • False Positives. Highly sensitive fraud controls can trigger a false positive, resulting in declines for legitimate purchases. By the time this problem is discovered, the consumer is long gone.

Resolving the Broken Chargeback Process
While most merchants agree that the chargeback process is outdated and inefficient, they may not know that they have the power to make substantial changes that will reduce disputes and associated costs.
This starts with a thorough accounting of how chargebacks are hurting them and then working with their customer service team, issuers, and consumers to create an open and collaborative environment.
Payment solutions like Verifi’s Order Insight™ are designed to reduce transaction disputes for both merchants and issuers by enabling communication without tying up valuable resources.
The benefits of collaboration between merchants, issuers, and consumers can be significant. When the right party has the right information about a transaction at the right time, a dispute can be resolved before it becomes a chargeback. When that happens, everyone wins.


A refrigerator that knows when there isn’t enough milk for breakfast. Lightbulbs that react to motion and change color based on a programmed schedule. Smart speakers that know when it’s time to restock the dog food and buy more paper towels…. The connected life is here to stay.
What started with relatively simple technology to power smart phones and smart watches has quickly evolved into the exciting and challenging domain of the Internet of Things (IoT).
You may wonder what the IoT has to do with chargebacks and friendly fraud. While IoT technology has enabled fast and easy ways for merchants to support consumer demands of instant gratification, these same devices also pose serious security risks. Because there is limited regulation around the security protocols of IoT devices, apps, and developing technology, the connected home has become an ideal playground for fraudsters.
Accomplished hackers are working hard to penetrate connected devices, creating an entirely new level of fraud. Consider this scenario:

  1.  A consumer has a smart device programmed to deliver groceries once a week.
  2.  The consumer never has to log in or verify credentials, the credit card is charged, and she is never asked to review or confirm the charge.
  3.  A hacker breaches the smart device security protocols and adds additional grocery orders that are sent to different addresses.
  4.  Because there is an existing grocery order, the merchant may not question these new transactions and never confirms them with the consumer.
  5.  Later, the consumer reviews her credit card statement and is shocked to see multiple grocery orders that she did not authorize.
  6.  Frustrated, the consumer files a chargeback and abandons the merchant. To make matters worse, she posts about the experience on social media. Now the merchant is at risk of losing loyal consumers who fear their accounts will be hacked.

Connected Device Security
Unfortunately, just such IoT attacks happen frequently, with deep ramifications for merchants, manufacturers, and consumers. To drive home the severity and risk level of cyber-attacks against smart devices, Yossi Atias, General Manager of IoT Security at BullGuard, set up a smart home at the 2017 Mobile World Congress Americas. In his demonstration, Atias showed how easy it is to hack into a secure smart home that uses multiple IoT devices, including a smart alarm, smart lock, Amazon Echo, and an IP camera.
So, what does this mean for merchants? In order to be vigilant, they must put in place fraud protection solutions that feature the latest in technology and intelligence.

  • Geolocation. Verifies the location of the consumer with the actual location of the active card
  • Biometric analysis. Compares the consumer’s fingerprint with that of the cardholder
  • Address verification service. The issuer compares the addresses provided during the transaction
  • CVV. Acts as an additional credit card security code during final payment authorization
  • IP intelligence. Provides deep analysis of the IP address used for the transaction to monitor possible risks associated with the IP location
  • Device intelligence. Exposes specific identifying details of the connected device submitting the transaction through deep packet inspection and proxy piercing capabilities
  • 3 Domain Secure. Works as a cardholder authentication protocol for e-commerce transactions and CNP purchases
  • Merchant co-op. Compares new orders against millions of orders by other merchants contributing in-network and scrubbed for fraud risk
  • SSL. Ensures secure encrypted communication protocols between devices and payment solutions

Merchants cannot rely on the inherent security of the connected devices their consumers use. It’s your responsibility to take extra security precautions to protect consumers and your business from fraudsters.
The technology and knowledge about IoT security is readily available, and we encourage you to be proactive against fraud threats. Contact the Verifi team to discuss your questions and concerns about IoT security – from mobile wallets, digital fingerprinting, smart speaker security, to multi-layered fraud protection and more.


There is no question that the internet has revolutionized commerce. Purchases happen in an instant with a few clicks, swipes, and taps – and a brand’s success can hinge on a merchant’s ability to deliver a smooth transaction process to their unforgiving consumers.
But meeting these expectations has had unintended consequences – a broken chargeback system that cost the industry $31 billion in 2017, $19 billion of which was absorbed by merchants. This presents a clear challenge to card-not present (CNP) merchants – establishing a loyal customer base within an ineffective chargeback system.
A single chargeback or instance of chargeback fraud might not seem like much. But the overall problem of chargebacks is never simple when you factor in the compounding impact it has on consumers, issuers, and merchants.
All it takes is one negative social media post about a stressful refund process, or multiple phone calls with the merchant to resolve an issue, to cast doubt about the brand and inspire additional negative comments.
Operating a viable CNP business model should have at core the aspiration to build brand loyalty through flawless execution. However, it’s critical that CNP merchants understand how tenuous the e-commerce marketplace is and take measures to support and foster the customer loyalty they intend to build.
The Slippery Slope of Customer Loyalty
Consumers can develop a strong connection with a brand, but it is a double-edge sword. When a transaction goes wrong, they are quick to hold the merchant responsible, regardless if the problem is a mischarge with the credit card issuing bank or the delivery service losing the package.
Recent Verifi-sponsored research reveals how this blame game hurts the primary merchant and similar merchants within the same niche or industry. In fraud disputes, 56% of customers hold the merchant responsible for the issues they experience.
Most telling from recent research is how the chargeback and transaction dispute process impacts customer loyalty. The longer and more exhaustive the dispute process, the more likely the customer is to abandon the merchant.

  • One call to resolve the dispute: 34% of consumers decreased or stopped merchant patronage entirely.
  • Two calls to resolve the dispute: 50% of consumers decreased or stopped merchant patronage entirely.
  • Three calls to resolve the dispute: 59% of consumers decreased or stopped merchant patronage entirely.
  • Four calls to resolve the dispute: 63% of consumers decreased or stopped merchant patronage entirely.

These statistics should not surprise merchants. The more stressful and intense the dispute process, the more disenchanted the consumer becomes with the merchant. Exacerbating this situation is how consumers respond and support similar merchants after a dispute. An overwhelming 63% of consumers who have gone through the dispute process are cautious about supporting merchants similar to the primary merchant.
Supporting Customer Loyalty
By their nature, CNP sales models do not encourage a consumer-merchant connection. That’s why it is so important for CNP merchants to put processes in place that establish a relationship with their consumers, especially when they have an issue with a purchase.
Collaboration solutions like Verifi’s Order Insight™, which connects consumers with merchants and issuers with relevant transaction information, can help resolve disputes quickly with no negative impact on the brand.
Contact Verifi to learn how you can protect your consumer relationships and retain their hard-earned loyalty by preventing chargebacks before they turn into disputes.