Chargeback fraud: an ever-evolving issue to be solved

Wednesday 26 July 2023 10:35 CET | Editor: Irina Ionescu | Interview

We interviewed Guy Harris, Chairman of the Board at Chargebacks911, about the prevalence of chargebacks in ecommerce and the main challenges the industry currently faces, as well as what needs to be done to reduce fraudulent activity.

Having worked on the bank side of dispute management for 15 years, what valuable lessons have you acquired that you can bring to Chargebacks911?

The issue of chargebacks is not a problem you can ignore. As an industry, we can’t continue to do the same thing and expect different results. We have an entire industry that is evolving with new technology, regulations, and consumer behaviour, but the chargeback mechanism has essentially remained the same. 

A valuable lesson I have acquired is that to provide viable solutions and change the legacy mindset of those in the payments industry, we must create and foster meaningful relationships with leaders in the transaction space. These relationships can then lead to a unified, industry-wide approach to tackling the chargeback issue.

What factors have contributed to the increased attention on chargebacks/dispute management, considering its longstanding presence?

This is an exciting time in the payments industry. In the past, payment systems primarily facilitated transactions, but now they have become an integral part of every business’ value proposition. Similarly, chargebacks are undergoing a transformation. 

Previously seen as a necessary evil to address consumer issues, they are now gaining recognition due to the surge in online commerce and subsequent increase in fraud. This realisation is leading to a shift in focus toward simplifying chargebacks and understanding the underlying causes. 

There is no doubt that Chargebacks911 has impacted the payments industry with its innovative approach to tackle the root causes of illegitimate disputes and fraudulent chargebacks at the source. Looking at the industry and the specialists forming it, we should be challenging legacy mindset and creating data-driven strategies and tactics. 

We aim to change the system not only by efficiently managing chargebacks, but also tackle the root causes of chargebacks, such as friendly fraud or first-party misuse, which accounts for around 75% of transaction disputes, according to Visa

In terms of the factors that have contributed to the increased attention on dispute management, you have ecommerce and digital transactions at an all-time high, more omnichannel retailers, businesses with multiple merchant accounts, multi-acquiring merchants, cross-border commerce – all these variables are transforming payment processes and require detailed oversight to effectively manage disputes. Furthermore, businesses have a vested interest in protecting the rights of consumers and their data from fraudulent transactions or identity theft. 

Traditionally, this protection was only available in the form of chargebacks, but with more advocacy for sharing data between buyers and sellers, we can elevate the chargeback process to become a vehicle for merchants and consumers to provide valuable transaction data to one another, to resolve disputes and ensure increase protection for all parties involved.

In your perspective, what are the main challenges you identify that the industry currently confronts?

The payments industry, particularly concerning chargebacks, has historically witnessed a lack of close collaboration and cohesive operation among its various stakeholders. However, Chargebacks911 serves as a vital intermediary, offering a comprehensive perspective from both sides of the discussion. Thanks to our unique position, we can engage with issuing banks, which often possess sizable teams dedicated to managing chargebacks, but operate within a somewhat cumbersome process.

As consumers receive their card statements, it becomes crucial to provide them with clearer and more detailed transaction information. By enhancing the clarity and crispness of transaction details and addressing issues like confusing billing descriptors, we can significantly reduce the occurrence of chargebacks. It is evident that as an industry, we have room for improvement in this aspect, and seizing this opportunity is imperative.

When a pain point like chargebacks becomes increasingly significant, it serves as a catalyst for change within the industry. Recognising this, we have a unique chance to drive positive transformations, ensuring better collaboration, streamlined processes, and enhanced customer experiences. By addressing the challenges and inefficiencies surrounding chargebacks, we can foster a more efficient and harmonious payments ecosystem.

Envisioning the future of dispute management, how would you describe the potential outlook in five years from now?

Disputes are continuing to grow by approximately 20% YOY. With more alternative payment methods coming to market, the main competitive advantage that credit cards have is the ability for consumers to dispute transactions with their issuing bank. Not only will disputes become more common, but they will become a tool instituted across all payment mechanisms. 

Originally, chargebacks were created as a protection for consumers to signify to banks when a merchant was doing something wrong. Five years from now, chargebacks will no longer be used as a compliance mechanism. Today, chargebacks are more so a tool of convenience, with many consumers seeing them as equivalent to requesting a refund from a retailer. In the future, they may become more of an inquiry process, where banks will work as an intermediary to support their cardholders, providing a concierge service. We can also expect an increase in the amount of dispute inquiries as they are made available for other payment methods, but we will see a significant decrease in the negative threshold that comes with chargebacks. 

Over the next five years, the chargeback process will evolve into a mechanism that protects the rights of both consumers and merchants, to ensure there is an even balance and level playing field. For example, one of the negative impacts of this current imbalance is the penalty and fines merchants incur with overturned chargebacks. 

If a merchant represents evidence that shows a transaction was valid and the issuing bank rules in favor of the merchant, that retailer still must pay the chargeback penalty and the chargeback will still be assessed to the merchant’s account, which negatively impacts their rate and could lead to higher processing fees, or even terminate their merchant account. As the industry evolves to recognise that chargeback fraud and misuse is an ongoing issue, these unfair rules within the payments system will be rectified.

About Guy Harris

Guy Harris is the Chairman of Board at Chargebacks911, with a career of 45 years, out of which 15 in the banking system. He possesses a deep understanding of managing large sales-oriented teams and led the European division for Elavon. He joined Bank of America four years ago and successfully built a merchant acquiring platform from the ground up. As Chairman, one of his primary goals is to effectively leverage his expertise in scaling businesses for long-term success, to help Chargebacks911 reach its full potential.



About Chargebacks911

Chargebacks911 drives profitability for online merchants by decreasing payment disputes and recovering revenue lost to chargeback fraud. Through a proprietary suite of software and service offerings, the company delivers transparent, end-to-end chargeback management solutions backed by the industry’s only performance-based ROI guarantee.

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Keywords: chargebacks, fraud management, fraud detection, online fraud, ecommerce, ecommerce platform, friendly fraud, fraud prevention, refund fraud, first-party misuse
Categories: Fraud & Financial Crime
Companies: Chargebacks911
Countries: World
This article is part of category

Fraud & Financial Crime


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