A recent report from the UK Cards Association (UKCA), UK Card Payments 2017, found that the volume of debit and credit card purchases in the last 10 years has more than doubled. Card payments made both in the UK and travelling abroad were made at an incredible rate of 518 every second in 2016.
Of the 16.4 billion purchases made in 2016, more than one-third (39%) were a combination of contactless and online payments, an increase of 15% year-on-year. With increasing card-not-present (CNP) purchases come increased opportunities for e-commerce fraud. Hand hand-in-hand with this comes potential loss of sales, goods, and costs for merchants and for the issuers, as well as loss of revenues, increased costs, and all in all a negative customer experience.
“Card payments play a central role in our economy, with spending equivalent to a third of the UK’s GDP. As consumers continue to make the switch from cash to contactless and with the rise of the app-economy, we forecast that the number of card payments will grow substantially over the next decade too.” – Graham Peacop, Chief Executive of The UK Cards Association
As we appear to inch closer and closer to a cashless society, we may be reducing the potential for in-store and Point of Sale (POS) fraud but we are also creating more opportunities for e-commerce fraud and, in particular, CNP fraud. With consumers predicted to continue to shop with more connected and mobile devices, CNP fraud is expected to reach up to $71 billion globally within the next five years.
The UK led Europe in the credit card fraud stakes in 2016, with more than 75% of fraudulent losses determined to be a direct result of e-commerce fraud and CNP transactions. The issues around CNP are not limited to what would traditionally be considered criminal fraud, but also to “friendly fraud”, commonly when cardholders fail to recognise a payment or charge on their debit or credit account.
Merchants and issuers alike face inefficiencies in the standard dispute resolution process, as consumers often contact their issuing bank directly instead of contacting the merchant. Adding to this, issuers have limited information of the sale to hand to validate the dispute, to which your profits are likely to take an unwelcome hit.
These inefficiencies can and often do lead to expensive chargebacks, with merchants assuming the costs of the chargeback in full, including everything from the refund of the sale, to the time, effort, and staffing costs right through to the cost of the lost product.
Dispute resolution technology and tools
It is possible to rectify many of these issues through collaboration and technology and tools that can be used to root out the bottlenecks in any dispute resolution process. Introducing a post billing chargeback notification platform would enable the processing of hundreds of thousands of cases on a monthly basis, and develop near real-time collaboration for both fraudulent and non-fraudulent chargeback disputes.
A number of benefits can be derived from providing customers, merchants, and issuers with more robust transaction details (e.g. product/service description, merchant name, and device name), including faster dispute resolutions by having all the relevant data to hand. Further benefits include reduced administrative and staffing costs and improved customer relations, due to the reduction of chargebacks and the avoidance of the chargeback process completely.
Information is key
Knowledge is power, as the saying goes, and that certainly rings true when dealing with e-commerce fraud, friendly fraud, and dispute resolution in the financial technology and payments world. By delivering data and robust transaction details directly to cardholders, issuers facilitate faster resolutions and remove any confusion created by vague descriptors.
Merchants can also benefit from an improved level of transaction information, shared at the right time, with the right people, by creating a shared feedback loop between themselves, issuers, and cardholders. Doing so can eliminate many unwanted chargebacks and most importantly identity fraud (e-commerce fraud and traditional fraud) and stop “friendly fraud”.
Unfortunately, e-commerce fraud is here to stay and as we move away from cash and towards a contactless society it isn’t going anywhere anytime soon. One thing we can do to alleviate this is manage the cardholder, issuer, merchant relationship and provide all parties with the right information to help all parties resolve disputes at the time they occur and negate issues further down the line that impact the bottom line of all involved.
Take a look at how we support issuers and merchants with Order Insight, our patent-pending platform that connects cardholders, merchants and issuers to resolve billing confusion and disputes in near real-time.