Chargebacks are a $31 billion problem that impact merchants, issuers, and customers. From the customer’s general perspective, it may appear that merchants and issuers wield all the power when it comes to managing disputes. However, reality tells merchants and issuers that the true power player in this dynamic is the customer.
The customer is the one whom both merchants and issuers must keep happy and loyal to their respective brands. Any cracks in the merchant-customer or issuer-customer relationship can have severe consequences for both parties, respectively. The influence of unhappy customers runs deep, particularly with the wide net cast by social media, online review sites, blogs, and digital consumer forums.
What can merchants and issuers do to manage consumer expectations when cracking down on rampant transaction disputes, fraud chargebacks, and invalid chargeback claims? Within the current chargeback dispute process, merchants and issuers are challenged to connect with customers effectively to solve problems outside the dispute process and fight invalid chargeback claims. Currently, it’s an either-or scenario: spend valuable resources trying to connect with customers (and often fail), or cave to chargeback disputes and suffer the consequences.
It’s time for change throughout the chargeback system. Customer loyalty is at risk. Merchants are losing revenue. Issuers appease customers at the peril of their own bottom line. The growing, corrosive effects of disputes and chargebacks on customers, merchants, and issuers are analyzed in the recent Javelin Strategy & Research report, The Chargeback Triangle, commissioned by Verifi.
Why Customer Chargebacks Happen
Customers have choices when dissatisfied with or confused by a charge on their credit card. Often, their first instinct is to assume their credit card has been violated and dispute the transaction directly with their issuer. This places issuers and merchants in a difficult situation with limited time and resources to resolve the problem to mutual satisfaction.
At the root of the chargeback problem is the lack of communication and coordination between merchants, issuers, and customers.
As highlighted in The Chargeback Triangle, the lack of effective merchant-issuer communication and collaboration can damage brand loyalty.
- Poor communication costs merchants. If a customer cannot effectively link a transaction to the business where it occurred, it can be very difficult for them to clarify the facts of the transaction and, therefore, they simply dispute it with their issuer.
- Regardless of whether a dispute is related to fraud, consumers generally hold merchants most responsible.
- Merchants suffer more customer attrition from chargebacks than issuers do from the disputes that spawn them. Of merchants that track post-chargeback activity, 63% of customers decrease their patronage.
- Transaction disputes are common among customers with nearly half (45%) of them disputing at least one transaction in 2017, and 25% have disputed more than one.
How to Improve Customer Loyalty
By sharing transaction data and by providing merchants and issuers the capability to connect immediately with customers – much of the confusion customers experience with payment card billing can be eliminated.
With open communication and collaboration, chargebacks can be avoided. Simply answering customer questions and addressing concerns about a transaction enables merchants and issuers to transform a potentially negative experience into a positive one and keep customer loyalty intact.
Contact us to learn more about Verifi’s collaboration solutions and how we can help improve fraud and chargeback management for your business, to protect your revenue, increase profits, and improve overall customer experience.