What Merchants Have, Issuers Need

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Consider how collaborating to share data and timely information can help solve the problems created by the outdated chargeback process.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.