In today’s dynamic retail environment, building and sustaining customer loyalty and trust is a top priority for merchants. While many businesses understand the need to adapt to changing customer preferences and create friction-free experiences to build and maintain a loyal customer base, few do this successfully. The rewards for getting it right, however, are significant.
Find Your Customer’s Pain Point
When customers are confused by their card statements or questioning card transactions, up to 66% of the time they blame the merchant for the problem. In the majority of transaction disputes, customers wish to deal directly with their card-issuing bank. Lacking the necessary transaction information to determine if the dispute is legitimate, issuers are inclined to process a provisional chargeback. This can serve to alleviate the concern over lost funds and improve loyalty. However, the customer is left assuming the merchant is responsible for the potential fraud. This in turn creates ill will and a reduction in merchant loyalty.
Brand Loyalty in the Digital Age
Customers who encounter a negative brand experience are more likely to share their story with others than those who encounter a positive one. This could turn away potential customers. In the age of the digital shopper, peer recommendations across social media can have a huge impact on the success of a business. Before, those with poor experiences could exist in a vacuum, but now they can take that experience and share it on social media with their friends and family. Merchants must strive to be part of the few who adapt to the ever-changing retail landscape and stay in their customers’ good graces.
Merchants Suffer More Customer Attrition than Issuers
Although both merchants and issuers bear the risk of losing future business and damaging brand reputation following a dispute or chargeback, it is merchants who see the bigger impact on their bottom line. 63% of customers decrease their patronage with merchants when they have encountered a negative chargeback experience. This is significantly higher when compared with the decline in card usage experienced by issuers; 43% of customers use their card less after a true fraud disputes and 39% for friendly fraud disputes.
Some merchants resist arguing the chargeback and accept it as a line item for the cost of doing business, preferring instead to keep the customer happy. On the other hand, forgive and forget might not always be a good idea. Merchants generally bear significantly higher costs in the chargeback process. Fines, labour, lost goods and refunds all combine to create a high price for a happy customer.
Collaborate to Serve Better
Simply put, ineffective payment practices can lead to the 76% of customers going directly to issuers when disputing a charge. One example is when a customer does not recognise a transaction on their statement. Although in many cases these type of disputes may be true fraud, unrecognised charges can also arise from unclear payment descriptors. If customers cannot easily link a transaction to the merchant, almost always their automatic response is to question the transaction with their issuer. To proactively reduce or even completely eliminate chargebacks, merchants need to rethink some of their existing processes and best practices.
Changes that improve communication among all parties in the dispute process can help reduce chargebacks, freeing up funds and resources that can be better directed towards growing their businesses. Implementing steps such as setting up clear billing descriptors and fostering better merchant-issuer collaboration can improve customer loyalty. Merchants can also implement real-time dispute notifications, receiving and resolving disputes faster to reduce time, resource and money associated with the chargeback process.
It is in the interest of all parties along the payment chain, from issuers to merchants, to implement improved dispute practices. Customers will remain loyal if they encounter a positive brand experience, potential customers won’t be warned away, and merchants can see improvements in their bottom line.