The Vast Majority of Cardholders Bypass Merchants to Dispute Charges
What can you say and do when a dissatisfied customer tries to sidestep you? In the world of chargebacks, merchants know this all too well. It’s frustrating when a consumer goes over your head to their bank to dispute a transaction. Not only have they left you out of the conversation but they’ve potentially made you look bad. How should you address it? And how do you make sure it doesn’t hurt your reputation?
When a consumer sees a charge that they don’t recognise on their credit or debit card statement, often their first reaction is to contact the bank directly, requesting the transaction to be reversed. Because issuing banks often lack the necessary information that could legitimise the sale or promptly satisfy the consumer, they often require little proof from consumers to validate a dispute claim. These disputes often lead to chargebacks being issued, as it is often not deemed cost-effective for banks to open an in-depth investigation.
According to a recent U.S. Javelin research study, 76% of consumers go directly to issuers when disputing fraud-related transactions. Disputes can occur for a number of reasons, including the consumer simply being confused over unclear or incomplete billing descriptors, or genuine instances of true fraud. The problem only gets bigger: merchants are not only hit with the cost of each reversed transaction, but there is added impact in the form of various fines, fees and related operational expenses, as well as the long-term damage to customer relations resulting from the chargeback process.
Bypassing the merchant holds costly consequences – not only for the merchant, but also for issuers and consumers. 60% of merchant chargeback costs are in management expenses. Yet it’s the consumer who ultimately bears the cost for this, since these losses eventually translate into higher prices as merchants and banks struggle to absorb increasing costs.
Compounding this problem, many consumers become serial offenders due to the easy chargeback experience. As consumers become more familiar with going online to look at their card activity, they can dispute a charge in real time, sometimes before they even receive their statements.
Some chargebacks are unavoidable, but with the right knowledge and expertise merchants can dispute them effectively or prevent them altogether. To do so, merchants should have a reliable solution in place for eliminating chargebacks.
The chargeback process allows merchants to dispute chargebacks they believe are unwarranted, by presenting compelling evidence to the issuing bank. There can be a lot of information to gather and manage in a timely manner. Merchants, issuers, and consumers can benefit from taking part in a data-sharing network that can provide all the necessary details of a transaction to help resolve disputes quickly before they become a chargeback. A collaborative approach through such a platform provides issuers the information they might not otherwise have access to, thus reducing operational costs spent on investigating. This can produce a speedy resolution and a positive experience for the consumer; it also helps merchants avoid chargebacks and save valid sales.
Verifi commissioned the new Javelin study, The Chargeback Triangle, which highlights the need for collaboration between merchants, issuing banks, and consumers. The study explores how consumer behaviour changes based on experiences in the dispute process, and the immediate, lasting and significant impact on merchants and issuers. More important, the report helps reveal opportunities to streamline the dispute process, and – in some cases – how to avoid chargebacks altogether. For instance, chargebacks can be prevented more than 80% of the time when the consumer contacts the merchant first with a dispute.
Merchants need to take hold of the dispute flow and control relationships with consumers at this critical juncture to pre-empt the chargeback process and improve overall consumer experience. Chargebacks can erode both brand value and customer loyalty, so it’s critical for merchants to be involved early in the dispute resolution process.