By Andrew Reszka, Regional Head APAC
Chargebacks continue to present a pain point and a drain on resources for merchants and issuers alike, but they’re not likely to subside any time soon. With Card Not Present (CNP) transactions on the rise due to increased online shopping, the potential for fraudulent CNP transactions and a greater number of chargeback claims will grow too. In an era of increasing fraud and chargebacks, it is more important than ever for merchants to work collaboratively with credit card issuing banks to reduce CNP risk. One way merchants and issuers can start to tackle this issue is through data sharing.
A transaction dispute can be initiated for a variety of reasons, such as vague descriptors, unintentional card use, fraudulent transactions, and illegible documentation. Instead of contacting the merchant to resolve the issue, customers frequently go directly to their issuing bank to have it addressed. This creates issues for both the card issuer and the merchant in a process that has been historically riddled with inefficiencies, the vast majority of which can be eliminated simply through merchant-issuer collaboration.
How Does Sharing Data Actually Help Prevent Chargebacks?
Contrary to what merchants and issuers might think, sharing data is one of the most effective ways to both prevent a transaction dispute from resulting in a chargeback and lowering the costs associated on an ongoing basis. A data sharing collaboration network, for example, presents a win-win scenario for merchants and issuers. By providing both parties with the ability to resolve disputes in an efficient and timely manner, this access to the network helps to avoid negative customer experience and resolve disputes before they result in a chargeback.
So, how does this work in practice? Firstly, issuers can direct the cardholder straight to the merchant to resolve any issues, putting the merchant back in control. Disputes can then be resolved earlier on in the process, negating the possibility of a chargeback by offering a refund or issuing a credit. Whether the issuer identifies a fraudulent charge or the cardholder initiates a transaction dispute, the sharing of this information with the merchant allows all parties to benefit.
Redirecting disputes directly to the merchant for quick resolution leads to a considerable number of chargebacks being stopped, because the near real-time notifications mean merchants can be informed of a dispute almost immediately. The subsequent exchange of data with issuers creates zero guesswork for merchants in relation to refunding transactions, reducing operational costs, and saves time spent on processing chargebacks that can be avoided. This ultimately enables a faster resolution with the bonus of not draining resources on what has historically been an exhaustive chargeback management process.
Why Collaborate? Some of the Benefits
So, we know that chargebacks and CNP fraud present an ongoing problem for both issuers and merchants, and that data sharing is the best way to prevent them happening and lower operational cost. However, direct contact between issuers and merchants is not the only benefit of working together. For example:
• Issuing banks attain greater visibility on consumer and merchant data, which is now practicable and affordable for banks of all sizes
• Merchants can reallocate the funds that once went to dealing with fraud and chargebacks to invest in growing their business
• Consumers are engendered with greater trust on all levels for businesses and banks, in addition to having access to more and better products and services due to merchant investment
Not only does merchant-issuer collaboration help reduce fees and increase profits for merchants, but the ramifications for time saved and reduced expenses that all parties enjoy is beneficial for the entire payments industry—in the form of improved levels of trust, customer experience, and brand loyalty.
As the saying goes, a problem shared is a problem halved. By working side by side, merchant-issuer collaboration can streamline the dispute handling process end-to-end. This helps to minimise risks, lower costs for all parties, and improve the customer experience overall. With issuers relieved of increased operational costs and unnecessary write-offs, and merchants able to retake control of the dispute process, both parties can resolve any issues directly with the customer. The result? An improved, efficient and effective dispute process, fewer chargebacks, and boosted profits.