After receiving a dispute, merchants may be tempted to refund the customer to try and fix the situation. But should you refund a customer? What about when you receive issuer notifications?
Do Not Refund the Customer After a Dispute
After a dispute is already filed, merchants should not refund the transaction. Because if the customer wins the dispute and you have refunded them, they will receive two credits. The credit that was pulled from the merchant account when the dispute was filed and the refund you credited them. Once a dispute is filed, merchants have to work through the dispute response process to right the situation.
What if I Refunded a Customer, then Received a Dispute?
If you already refunded the customer before you received the dispute, you can provide proof that a credit that directly offsets the disputed charge has already been processed. This should include timestamps showing that the credit was processed before the dispute.
But there is a way merchants can intervene before the customer files the dispute. This process allows merchants to refund a transaction before the dispute is finalized.
Reaching Customers Before They Dispute
Traditionally, it is tough for merchants to reach customers before they decide to dispute a charge. For example, a recent Javelin report found that "merchants face a great challenge in getting customers to reach out to them in cases of suspected fraud: Cardholders bypassed merchants and went directly to their issuer in 76% of cases." That means the majority of people that do not recognize a transaction head straight to the bank to dispute a charge. As a result, the merchant is unable to remedy the situation until after the dispute.
With Real-time Resolution (RTR) merchants are able to intervene before the dispute ever happens. RTR enrolls merchants in Visa Merchant Purchase Inquiry (VMPI), allowing for real-time communication of customer, order, and product details.
With RTR, the issuing bank uses the transaction details to decide if the dispute is invalid and prevent it from being filed. In cases of friendly fraud, the additional data helps jog the cardholder's memory about the purchase. And in cases where the cardholder is trying to intentionally misuse their chargeback rights, the extra layer of confirmation acts as a critical deterrent from proceeding with the dispute. RTR is essentially allowing merchants to share their side of the story before the issuing bank decides if a dispute is valid or not. Beyond helping prevent disputes, RTR also helps merchants take meaningful actions with VMPI issuer notifications.
VMPI Issuer Notifications
There are a couple of different types of VMPI issuer notifications, but the one we will focus on is the inquiry notification. An inquiry notification is a request for more information about the transaction. The response from the merchant should contain an enhanced level of company information, transaction, and order details.
In general, merchants should not refund the transaction connected with this notification unless your company is at or above the dispute rate limits. Then you may want to consider proactively refunding inquiries. Doing this will prevent a dispute from ever being filed. Proactively refunding is specifically helpful for merchants that have low ticket items, and the dispute fee will cost more than just refunding the purchase. If you do choose to refund proactively, you can change your enhanced descriptor with VMPI to state, "this transaction will be refunded."
Click here to learn more about Real-time Resolution and the possible ROI for your company.
Although cardholders are more likely to reach out to their issuing bank when they don't recognize a transaction, it is still essential for merchants to be prepared to answer any questions a customer has with excellent customer service. If a customer reaches out to your customer service, it is an opportunity to prevent disputes from happening and keep a customer relationship.
Having your customer service available at every part of the transaction and buyer journey will make it easy for customers to talk to you. And makes your customers aware that you are willing to work with them to make the situation right. Merchants can make the process of reaching out as easy as possible by putting your contact information wherever the customer may look for it. This could include email, webpages, merchant descriptors, in-app, or anywhere else your customer interacts with your brand.