Is Disputing a Charge Getting Too Easy?

Sydney VaccaroChargeback Basics, Chargebacks, Fraud Prevention1 Comment

Is Disputing a Charge Getting Too Easy_

As the world continues to make things easier and more efficient for customers, it comes with trade offs. One example of this is exchanging security for convenience during the checkout process. Merchants that have too many verification steps in their checkout process could turn away customers. On the other hand, having for too little verification information means the merchant may accept fraudulent cards or not have enough compelling evidence to make a winning chargeback response.

Even issuing banks face this trade off. By making the process to dispute charges so customer friendly it is putting merchants at risk for an increased dispute rate.  We will look at how issuers are making disputes so easy to file and what merchants can do to combat this trade off.

Banking Apps and The Easy Route to Dispute

Ten of eleven card issuers spoke with now allow consumers to dispute a charge online. And four out of eleven also let cardholders dispute a charge on their mobile apps. Other issuers revealed to that they are looking into adding a button online or on the issuer’s app to initiate a chargeback. You can see the their findings in the table below.

Which Banks Allow Disputes Online or Via App?
Bank or Credit Union Can Dispute Online Can Dispute Via App
American Express Yes No
Bank of America Yes No
Capital One Yes Yes
Chase Yes No
Citibank Yes Yes
Discover Yes No
Navy Federal Credit Union Yes No
PNC Financial Services Yes No
TD Bank No No
USAA Yes Yes
Wells Fargo Yes Yes

This kind of convenience to dispute a charge is a threat to merchants dispute rates. Think about it If it is easier to dispute a charge – rather than reach out to the merchant’s customer service – which one do you think the customer will choose?

The Bank’s Motives – Customer Expectation

Customers are becoming more aware of their right to dispute a charge. Julie Conroy, the research director for Aite Group, touches on this on this subject: “Consumer awareness of their chargeback rights has increased over the past five years. We’ve seen a doubling of the term ‘chargeback’ on Google.”

This increase in dispute awareness could be attributed to the rise of ecommerce and card-not-present transactions. A recent survey of more than 1,000 online shoppers found that 47.3% of respondents said they occasionally bought from websites they had never purchased from before over the past year—and there were only 5.3% of shoppers who said they have not done so in the past 12 months.

These cardholders are making purchases from merchants they have never shopped with for products they have never actually seen, touched, tried on, etc. And when they receive the product it may just not work for them for a variety of reasons. And if the product doesn’t work for them they will want to return it.

But what if they can’t return it? What if shipping it is too expensive? What if customer service will not accept the product return? All of these concerns are a part of online returns that customers have.. And knowing their bank has a convenient feature can lead them to disputing the charge.

The boom of ecommerce has not gone unnoticed by fraudsters, and they do their best to follow the money. Online purchases have opened doors to new kinds of fraud schemes. Which increases merchant dispute volume from both chargeback fraud and true fraud.

Now that customers are familiar with disputing a charge, or have even disputed a charge successfully in the past, they want the process to be smooth and easy through their issuing bank.  

The Bank’s Motives – Saving Time and Money

Conroy continues with reasons why card issuers are streamlining the chargeback process. “One is a continued focus on improving the customer experience. No one likes getting on a 13-minute call with their bank to dispute a charge. If you can allow them to do this digitally, you’re providing a better customer experience. The other is cost. The average call is 13 minutes. For some of these disputes, the consumer could be on the phone for 30 minutes. That’s really expensive. The aggregate cost for U.S. issuers alone for call centers to field these calls is $2 billion a year.”

Banking Apps and The Easy Route to Dispute

Issuers would like to keep their customers as happy as possible. So the ease in which customers can dispute a charge is definitely not going anywhere. But as a merchant, what can do to combat this?

Real-time Resolution and Other Advancements

Real-time Resolution is a tool that can help reduce the amount of invalid disputes being filed. This feature provides customer, product, shipping and usage detail to the dispute analyst at the cardholder’s issuing bank at the start of the dispute lifecycle. With this enhanced level of detail, the issuer is equipped to decide if the cardholder should file a dispute. This level of customer, order and product detail is normally not available until well into the dispute process.

Visa Claims Resolution (VCR) was Visa answer to the time and cost it was taking for merchants to respond to disputes. They realized a lot of money was being burned in this process. Visa create VCR to reduce time spent and decrease the amount of invalid disputes. By helping to prevent disputes that either have no merit or are detected as fraud. This will help your company reduce the amount of disputes.

Mastercard Dispute Resolution Initiative is Mastercard’s plan to prevent invalid disputes and streamline the dispute process, much like Visa’s VCR. The first phase of this initiative will be rolled out October 12, 2018 with more phases to follow.

Have Customers Work With You First

Ideally, you want the customer to bring any complaint to you before they even consider disputing the charge. So you need to make sure it is easy for them to contact your customer service team. That contact channel should be as easy as submitting a dispute.

Easy-to-find contact information. Put yourself in your customer’s shoes. Would it be easy to find your customer service email address or their phone number? Adding your customer service contact information to emails or merchant descriptors is a great way to make it easy for customers to contact them.

Empower your customer service and employees. When the customer does contact customer service, your team needs to be prepared to take action. Give your employees the power to make a situation right with a customer. By doing this, your customer will leave the interaction with good feelings about your company. On the other hand, if a customer reaches out to customer service and the representative is unable to help them out, the customer may then turn to the dispute process to get what they want.

Chargebacks Should Be and Stay a Last Resort

Customers have great power when it comes to disputing a charge. Although banks are making it easier for customers to issue a chargeback, you need to take the necessary steps to prevent disputes and keep disputes a last resort for your customers. This is accomplished by providing the same convenience the issuing bank does—but though your customer service.