Chargebacks911: E-stores lose over USD 40 billion annually to chargebacks, and the problem is growing by 41 percent

Monday 23 January 2017 07:57 CET | Editor: Melisande Mual | Interview

Monica Eaton-Cardone: Merchants need the opportunity to customize their risk management strategy and determine an appropriate threshold for fraud exposure

Merchants have seen the percentage of total revenue dedicated to fraud and chargebacks rising steadily for the past several years. Handling chargebacks is a time consuming and costly process for merchants. What causes the inefficiencies and lack of transparency?

One of the key reasons why the chargeback epidemic is spiraling out of control is that one size does NOT fit all, which is why dispute-resolution experts must be 100 percent fluent in all the technically divergent idiosyncrasies of every link in the transactional chain. The real challenge is, every bank and every credit card company uses a different methodology and requires a different fluency. Unfair chargebacks must be disputed individually; this requires a case-by-case argument that identifies exactly where the breakdown occurred in the transactional chain; who is to blame; and why. Fortunately, at Chargebacks911, our breakthrough FinTech security system – Intelligence Source Detection or ISD Technology – now safeguards over 2.4 billion online transactions every year. The sheer volume of work that we handle, and the fact that we represent clients in 87 different countries, allows us to develop the most-effective dispute-resolution techniques anywhere in the e-commerce industry. The quantity and quality of our ISD Technology’s proprietary data is unrivaled; we know what works, and we know what does not. However, because of outdated financial regulations and an utter lack of uniformity within the sector’s transactional actors, chargebacks will continue to be time-consuming and unnecessarily complicated for far too many online merchants. And that’s a real problem.

We typically see FinTech companies disrupting existing business models where friction, high cost and inefficiencies are hindering growth and margin. Do you see a role for blockchain technology solving inefficiencies in chargeback management?

Innovation will have to come from the private sector. The rules overseeing America’s online economy are woefully outdated, wholly inadequate, and nowhere near to equitable for today’s card-not-present, Internet-based marketplace. E-stores lose over USD 40 billion annually to chargebacks, and the problem is growing by 41%. It would be wonderful if the federal government was working hard to solve these problems, but to date, Congress has demonstrated scant interest in common-sense regulatory reform. I encourage those involved in blockchain technologies to offer new solutions; everyone with a vested interest in the success of ecommerce should try to help. Private companies like Chargebacks911 are investing enormous sums of money to streamlining the chargeback process and ensuring that affordable, transparent solutions are available to online merchants of every size and category. Quite honestly, if innovation does not come from private entities, then I fear it will not come at all.

What do you hope to see happen in 2017?

I hope 2017 will be the year when the chargeback epidemic is finally recognized as one of the single biggest threats to the future of e-commerce. Chargeback fraud is a critically serious problem, but receives a small fraction of the media attention of identity fraud. And that’s a real shame, because identity fraud costs businesses USD 2.7 billion annually, but chargebacks and chargeback-related expenses costs businesses more than USD 40 billion each year. Perhaps if the public were better informed about the problem, they would understand just how large a stake they have in its outcome. There needs to be greater sense of urgency. The e-commerce industry has the unique capacity to elevate the lives of so many people, but until we learn how to curtail the growth of fraud and protect e-stores from cyber-shoplifters, it will never reach its full potential.

Could you elaborate on the Global Risk Technology roadmap of developing new solutions that will create a more transparent and efficient chargeback management process?

At Global Risk Technologies, we have adopted a companywide culture of constant improvements; we are always developing new processes and new methodologies, because the e-commerce industry is evolving so quickly. When you safeguard 2.4 billion online transactions per year, you begin to identify certain patterns and behavioral trends that help our clients avoid fraud and recover lost revenue. It allows us to work quickly and efficiently, streamlining our outreach and stockpiling the statistics that matter most for resolving transactional disputes. With pinpoint precision and absolute accuracy, it is our job to make the most airtight argument possible why a chargeback was unwarranted, and this requires us to ‘reverse-engineer’ the decision-making processes of all the different financial institutions. By now, we have gotten chargeback dispute-resolution down to a science! We are experts in all aspects of the e-commerce transactional chain, and currently manage over 20 million transactions every single month. Our proprietary ISD Technology and institutional knowhow differentiates us from our competitors; we are fanatical about helping our clients. It is our hope that this allows e-stores and online merchants to do what they do best – serve their customers and grow their businesses – because we are fully focused on what we do best. Either way, we will never stop innovating. We will never stop improving. We will never stop investing in new technology. It’s our passion, and something we take extraordinarily seriously.”

In February 2017, The EBA will publish new Regulatory Technical Standards. Could you elaborate the outcome of RTS on strong customer authentication?

Depending on the outcome, the EBA’s revised Payments Service Directive (PSD2) could cause 2017 to be remembered as the year we set European ecommerce back a decade or more. For several years now, the ecommerce environment has been driven by consumers’ demand for a frictionless experience. Merchants have found ways to adhere to these preferences by incorporating multiple layers of backend tools, meaning there has not been a significant sacrifice in the area of fraud detection. While there is certainly room for industry-wide improvements—as ever-increasing fraud losses have indicated—it should not come at the expense of the user’s experience. Consumers’ desire for a seamless checkout process indicates security is not their top concern, and forcing stronger consumer authentication will not be well received.

I have been a relentless advocate for payment industry standardization and compliance. However, the EBA’s take on compliance is a dangerous misstep and a classic example of how governing bodies can mandate regulations without thoroughly considering the valid arguments of everyone involved.

Threat assessment is not a one-size-fits-all task. Merchants need the opportunity to customize their risk management strategy and determine an appropriate threshold for fraud exposure. Standardization and compliance should apply to how we handle an inability to do these things, not how they are executed in the first place.

About Monica Eaton-Cardone

Monica Eaton-Cardone is an international entrepreneur who provides sustainable revenue retention and risk reduction solutions to the ecommerce environment. She is the co-founder and COO of Chargebacks911, as well as the CIO of Europe’s Global Risk Technologies.


About Chargebacks911

Chargebacks911 is the world’s leading chargeback management service provider. The company specialises in helping merchants minimise their risk exposure by mitigating friendly fraud to ensure optimum profitability and longevity. Chargebacks911 is a Global Risk Technologies company and works to expand the brand’s global outreach efforts with standardised efficient dispute management solutions developed for both acquirers and issuers alike.

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Keywords: chargebacks, blockchain, fraud, merchants, online stores, fintech, Monica-Eaton Cardone, Chargebacks911, interview
Countries: World