Everyone wants the transaction to go well. The customer wants the good and/or service rendered, and the merchant wants to earn revenue from said goods or services. Each party gets what they want, and they can move on with their daily lives. That is why it can be, among things, heartbreaking to receive a dispute from a transaction. At face value, it appears the customer relationship went south.
There can be numerous questions that arise when merchants receive a dispute. They may be thinking, “Why didn’t they just contact customer service? The dispute was filed within the window of our return policy.” Or it could be something more technical, such as, “Great. Now I have 22 days to review the reason code, gather the compelling evidence and send my dispute response to [PROCESSOR].” But one question that arises after sending the response document usually goes like this:
This post will help improve their chances of dispute prevention. All of these tips are great tactics to use after the transaction took place and (most importantly) after the transaction has been settled.
Be More Transparent With Merchant Descriptors
Unclear or vague merchant descriptors are the main causes of disputes that address ‘unrecognizable’ transactions. These disputes will often be tied to reason codes related to fraud or authorization claims. Here are some of these reason codes:
Merchant descriptors should provide clear details on a cardholder’s statement, and whom they can contact about the withdrawal. Based on my personal experience, I have a knack of calling my issuer whenever I see an unrecognizable transaction. But not everyone has the patience to pull their card out of their wallet. And contactless cardholders may find it more efficient to dispute the charge and not ruin anyone’s day…except the merchant’s day.
The following tips may seem obvious to some, but we cannot underestimate how these tips are not utilized. Or at least it is not being utilized by enterprises who dub me as an active customer.
Tip 1: Provide the Merchant Name, Not the Legal Name
A legal name – such as a parent organization or the name recognized by the IRS – may not ring any bells for customers. But a merchant name – such as ‘A-OK Streaming Music’ – will be recognizable as customers skim through their card statements. The most effective descriptors are those that clearly remind customers of who received their funds. It should not confuse them to think that another entity received their funds, even though that entity is associated to the merchant.
Tip 2: Provide Their Contact Information
An email address and a phone number works well in two ways. One way is to allow customers to directly contact the merchant. This gives them another channel for them to resolve any inquiries before submitting a dispute.
The other way is to give merchants evidence to include in their response if a dispute is filed. Again, customers were offered another channel to contact the merchant. This will show the issuing analyst that there was no excuse for customers not to contact them before submitting a dispute.
Remind Customers of Merchant’s Return Policy
No merchant enjoys losing revenue. They also don’t enjoy losing more revenue from disputes. For example, let us say the merchant received a dispute from a Visa transaction that involves a shipped good. The transaction amount is $39.99, but the merchant received a dispute fee incurred as the dispute goes through its lifecycle. The incurred fee is established by the processor, and it can range from $10 to $60. (The exact dollar amount and the associated processor can be found here.)
The revenue loss will add up when the merchant receives disputes. After all, that is $10 to $60 being lost in addition to losing $39.99 from the transaction. Sometimes a refund is the best solution to prevent customers from disputing transactions.
So remind them when the ‘return window’ is about to close. It is recommended to remind customers more than once about the merchant’s return policy. Here is a timeframe that can be used a template:
First Reminder: Pre-Authorization
Inform customers about the return policy prior to or during the transaction. This will involve additional support from sales and customer service if it is a card-present (CP) transaction. Card-not-present (CNP) transactions should provide clear briefs on a merchant’s return policy. A tick box in checkout may not always help with reducing the dispute volume. But a few bold statements that summarize the merchant’s return policy will be more effective.
Second Reminder: Post-Authorization
Always inform customers about the duration of the return window. Whether it is 30 days or 90 days, this will give customers an idea as to how long they are able perform a product return and receive a refund. (Feel free to read our post on how to reduce product returns.)
Third Reminder and More: Dependant on Return Window
It will require A/B testing in order to know how frequent merchants should send email reminders. The goal is to consistently remind customers about how many days they have left before the return window closes. For example, the third reminder can state they have two weeks left to return the shipped good. And the fourth reminder can they have one week left to return said good.
These reminders will also work in their favor if a dispute should be filed. By using this template, merchants will have at least three additional evidence to include in their response document.
Present the Transaction Details
There are several benefits from presenting transaction details to customers. One main benefit is that it stops a dispute from being filed. For example, let us say a customer sees an unrecognizable transaction on their card statement. The record shows an unfamiliar merchant descriptor, and the withdrawal prompts no recollection for the customer.
So the customer submits a dispute to their issuing bank. Since the bank is within the Visa card network, the dispute analyst conducts a VROL-transaction inquiry. VROL then recognizes the merchant’s dispute software to be compatible for Real-time Resolution. The software then renders a response (without the merchant’s oversight) and sends it to VROL.
After the issuer’s dispute analyst receives the RTR response from VROL, they notices it reveals not just the transaction details, but also the customer and order details linked to the transaction.
This whole descriptive scenario happens within seconds. And the dispute analyst sees that the transaction was legitimate. Therefore, the customer’s submission has been rejected—and the dispute has no merit to be filed.