By: Paul Golden Published on: Thursday, September 13, 2018
Without a robust mechanism for handling chargebacks, merchants will continue to face sizeable losses from both misguided and malicious fraudulent claims.
A Javelin Strategy & Research study commissioned by Verifi found that consumers disputes and chargebacks generated $31 billion in financial losses in 2017, of which $19 billion was borne by merchants. The study also noted that for every dollar in a disputed transaction, merchants and issuing banks incur an additional $1.50 in costs due to demands on technology, personnel, and external resources.
Among the most frequent sources of chargebacks are subscription billing models or free trials that incur a charge after the introductory period. These services show higher volumes of chargebacks due to the consumer’s failure to review the policy, which states that a subscription continues after the introductory period.
There are various tools merchants can use to examine transaction parameters, including device fingerprinting solutions that help determine whether the device used is known to be associated with the consumer, explains Aite Group research director, Julie Conroy. “They can also check that the IP address is consistent with the location of the consumer, or whether the device has a history of being associated with fraudulent transactions,” she adds.
Fighting fraud efficiently
Conroy says her research has revealed that merchants who make it easy for consumers to contact them (for example, by including a phone number on the payment card statement or having a person answer the phone rather than an automated system) tend to have much lower chargeback rates.
The study commissioned by verifi found that in more than eight in 10 cases in which the consumer contacts the merchant first, a chargeback is prevented, observes the firm’s CEO, Matthew Katz. “In addition to simple and convenient contact methods, email notifications sent to the consumer notifying them of a recent purchase, a shipment or pending refund will ensure that they do not forget or become confused over activity to their credit card account,” he concludes.
This story originally appeared in Euromoney.