Giving cardholders the right to dispute a payment and receive reimbursement for goods and services because they were not ordered, or not what they were professed to be, helped Visa and Mastercard develop and protect their brand equity when introduced in the early days of the bank card industry. However, the dispute and chargeback process creates expensive operational problems for merchants and issuers. Some studies put the number of illegitimate requests for chargebacks at more than half of the total.
Verifi has created two services, Order Insight and CDRN, that facilitate the exchange of data between merchants and issuers to deflect a chargeback or prevent a chargeback dispute from occurring after it has been initiated. It is critical that issuers are involved because cardholders overwhelmingly first choose to dispute a purchase with issuers.
Order Insight lets issuers login to Verifi’s portal to receive transaction details the merchant holds about the cardholder and the sale. Often, this is sufficient to provide their cardholders with facts that deflect the filing of a chargeback. When successful, this reduces costs associated with management of chargebacks, which for merchants is their highest expense in the dispute process.
Verifi’s CDRN provides an up to 72-hour window for merchants to respond to issuers with details about a transaction before a chargeback is filed. Once notified by Verifi, merchants can refund the cardholder’s money to avoid a chargeback or decide to “decline the case” and accept the chargeback with the aim of fighting it. In both cases, Verifi notifies the issuer of the merchant’s intention.
Separate from the chargeback dispute services, Verifi offers a product called Decline Salvage for recurring billers—businesses that regularly experience authorization declines because they don’t have the latest card account information for customers who might have needed to get a new card since the last time they made a payment. Decline Salvage helps billers receive successful authorizations after an initial decline.
Card issuers are also impacted negatively by chargebacks. The fully loaded costs issuers incur for handling a cardholder dispute is in the $25 to $37 range. It is typical for issuers to experience chargebacks on less than one-tenth of 1% of their cardholder purchase volume. However, it is common for chargeback disputes to account for 7% to 9% of an issuer’s operations budget.
Order Insight and CDRN can be used by issuers and merchants anywhere in the world.
Verifi continues to seek U.S. credit and debit card issuers to participate in its services. It is also looking for U.S. acquirers to introduce its data exchange services to their merchant customers.