Voice of the Industry

Listen to each other: What this digital merchant says about dealing with chargebacks [a transcription]

Thursday 13 February 2020 06:41 CET | Editor: Mirela Ciobanu | Voice of the industry

Monica Eaton-Cardone sat down with a retailer to answer some of its burning questions surrounding the chargeback system and explain what financial institutions should be doing to help

There is a disconnect between merchants, issuers, and acquirers when it comes to managing chargebacks and friendly fraud, and it needs to be mended in order to reduce the total cost of chargebacks that falls onto everyone in the payment chain. Otherwise, merchants will go on thinking that issuers are always going to side with the consumer (whether they’re right or not), and they’ll never know how to work with them most effectively – in a way that benefits both parties.

The costs are high. A quarter of issuers’ total operational budget is spent on chargebacks, not including write-offs and losses. Meanwhile acquirers often pursue incorrect chargebacks, causing high operational costs and unnecessary losses. The disputes that remain unidentified carry the highest costs.

Consumers are also paying the price, unbeknownst to them – there’s a hidden tax on all online transactions after a merchant factors in additional costs of friendly fraud (product loss, financial penalties and payment theft) when setting their prices.

So, how do we bring about the beginning of the end for this payment network disconnect? By clearing the air, opening communication lines, and demystifying the other party.

The following is a transcription of a call that took place in January 2020 between a digital merchant and a member of the Chargebacks911 team. This snippet gives insight into the pressure that merchants face when it comes to chargebacks, the tight time restrictions, and the feeling of losing a never-ending battle.


Merchant: Sometimes I feel like issuers are out to get me. It’s hard enough trying to understand how to fight chargebacks, but when we do there are so many hoops to jump through. How can I improve my odds of winning a dispute?

CB911: Don’t worry, most merchants feel the same; like there’s a black hole in their chargebacks knowledge and the processes surrounding them. When you feel like there’s no way your dispute can be rejected and it still is, it can feel a bit hopeless.

Giving yourself the best chance of winning is about assembling a strong case. It can be tough, though, since you only have a few days to do this after you’ve been notified of a chargeback – and recent rule changes from Visa reduced this timeframe even further.

With just a few days to assemble and submit a case, it’s crucial that you keep detailed and organised transaction records that are easy to recall quickly while pulling evidence together. 

You also shouldn’t underestimate the value of a compelling rebuttal letter since it gives your dispute context. The letter should be very clear about what the information means and properly detail why it supports your case. A well-documented dispute response in the manner sought by the card scheme makes the case clearer to the issuer and speeds up the process on their side.

Merchant: How can I make sure that an issuer has all the evidence it needs in just a few days? It genuinely seems impossible to keep on top of.

CB911: You can actually be a bit proactive on this front. You know, even though Visa reduced the time that you have to respond to or challenge disputes, it also launched a plug-in tool called Visa Merchant Purchase Inquiry – or VMPI – that you can use to make Visa chargebacks more manageable.

It’s basically a tool that you can use to send additional details, like purchase information, digital receipts, and so on, before a complaint is ever raised by the customer. Not only can issuers access all this information and exchange data here with you in real time, but it also filters out obvious customer inquiries before they escalate into a chargeback. We’d recommend integrating VMPI into your business infrastructures – this is something we can help with, too.

Merchant: Okay, so, before any of these tools, before compiling a case, how can we even tell friendly fraud and false chargebacks from genuine ones? By nature, we’re finding them ridiculously difficult to detect.

CB911: Honestly, you’re not alone. Our research shows that most merchants find this to be the biggest challenge when managing their chargebacks. It poses huge problems since in order to successfully mitigate chargebacks, you must be able to identify what’s causing them. And only then will you know how to proceed – whether that’s an automatic refund for a real dispute or disputing a case of friendly fraud.

You might not always be able to recognise it, but friendly fraud is likely to cause the majority of your chargebacks – it’s the number one cause across the industry, and more than half of the merchants in our study are seeing instances of it increasing. If you don’t identify this type of fraud, you’ll not only have to refund the customer anyway and lose money on the goods, but you’ll also be seen as an easy target and may be repeatedly attacked.

Our advice would be to review each case individually and compare it against your records. If the customer’s complaint seems reasonable, then accept the chargeback and develop a strategy to ensure the same issue doesn’t happen again. If the claim seems false, then assemble a case to refute it. We can help you detect the source of chargebacks and compile a strong case against them, so you don’t have to waste resources figuring them out yourself.

Merchants, issuers, and acquirers each encounter many issues when dealing with chargebacks, from the initial call with the customer to instigate the dispute, to complying with new PSD2 regulations, understanding rule changes, and everything in between. It’s important that we listen to each other.

To speak to a member of the team directly and learn more about Chargebacks911, visit: https://chargebacks911.com/.

About Monica Eaton-Cardone

Monica Eaton-Cardone has worked for over a decade to educate merchants and financial institutions about hidden threats in the rapidly-changing payment fraud landscape. Leading Chargebacks911, she established Europe’s first chargeback remediation specialist to tackle the GBP 80 billion chargeback fraud problem. 

Monica is passionate about the need to educate merchants and financial institutions on risks that will only get worse if left unaddressed. She was one of the earliest and most vocal voices to warn of the hidden risks of friendly fraud, including how evolving consumer behaviour has caused a perpetual cycle of rising fraudulent actions.

About Chargebacks911

Founded in 2011, Chargebacks911 is the first global company fully dedicated to mitigating chargeback risk and eliminating chargeback fraud. As industry-leading innovators, Chargebacks911 is credited with developing the most effective strategies for helping businesses maximise revenue and reduce loss in a variety of industries and sectors within the payments space.

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Keywords: Monica Eaton Cardone, chargebacks, merchants, issuers, acquirers, friendly fraud, Chargebacks911
Categories: Fraud & Financial Crime
Countries: World
This article is part of category

Fraud & Financial Crime