Voice of the Industry

The chargeback knowledge gap: How issuers and merchants can collaborate

Thursday 10 June 2021 08:41 CET | Editor: Alex Guzu | Voice of the industry

Craig McClure, Director of Relationship Management at Fi911 and Chargebacks911, explores what FIs can do to bridge the disconnect between merchants and themselves, and help them fight back against fraudulent chargebacks

Friendly fraud is rising, and without a coherent data flow between merchants and issuers, chargeback costs will have far-reaching consequences for everyone in the industry.

Data from the 2021 Chargeback Field Report from dispute resolution specialist Chargebacks911 and sister brand Fi911 has found that a third of merchants surveyed are unable to distinguish friendly fraud attempts from genuine claims. And when they do contest, at least 31% of merchants have difficulties in contesting illegitimate claims because of a lack of understanding and data-sharing between merchants and financial institution issuers.

Even though merchants bear most of the costs of chargebacks, financial institutions (FIs) are also losing billions of dollars in processing costs, payment scheme fees, and other associated financial hits, which can all add up to a damaging blow to an FI’s profitability. When a merchant can’t cover a rising tide of disputes, it’s the acquirer who’ll be left to pick up the tab. FIs being forced to tighten their belts is bad news for everyone in the industry, from payment schemes to merchants – less money for innovation means less resources to tackle emerging fraud threats in the future.

The data disconnects that impact chargeback resolution

The Chargebacks911 Field Report shows that even if a merchant responds to a chargeback, the issuer could reject the merchant’s claim for a variety of reasons. Of the chargeback win rates reported by survey respondents, 32% was the average win-rate. In other words, FIs will only accept roughly one in three cases.

In many cases, when an issuer files a cardholder dispute against a merchant due to a transaction error or discrepancy, the merchant and consumer are not even aware that a chargeback is being processed. Not only is the merchant kept out of the loop, but they’re hit with unforeseen fees, which obviously damages the merchant-issuer relationship.

Transaction anomalies can be automatically triggered and turned into issuer chargebacks for several reasons, including missing data codes or fields, expired cards or accounts, declined authorisations, duplicate processing, and other issues.

All of these can be rectified by FIs helping to educate merchants on what to look out for when processing transactions. FIs can ask merchants for additional transaction details to improve authorisation rates. When combined with biometric analytics and authentication, FIs get a clearer picture on cardholder behaviour, retrievals, representments, and arbitration cases, helping them to collectively cut chargeback ratios and protect their cost bases.

Data sharing can stem the tide of chargebacks

It’s in both the merchant’s and FI’s interests to avoid disputes at the earliest opportunity. That calls for proactive open communication, more thorough data sharing, and frequent reviews to ensure nobody is missing any parts of the chargeback and dispute puzzle. What might be obvious to an FI may not be so obvious to a merchant, particularly a merchant who is new to ecommerce.

In light of this, more merchants and FIs are now sharing data and pooling resources to stem the rising tide of chargebacks. With the help of integrated artificial intelligence (AI) and machine learning (ML) solutions, FIs can eliminate much of the manual legwork they’d normally be required to do when working with merchants.

The beauty of AI is its ability to anticipate, analyse, and automate transaction issues before they escalate into disputes. Deploying it within a chargeback management platform can reduce manual administration and processing costs, speed up data sharing with queue-based routing and automated notifications, remove process redundancies, and free up resources for the FI to focus on other business areas.

While these intelligent solutions can’t fix every conceivable problem, such as educating consumers or clearing up merchant refund policies, they can provide both FIs and merchants with a deeper understanding of the chargeback management process, and go a long way in filling the knowledge gap that exists between FIs and merchants.

About Craig McClure

Craig McClure equips clients with the regulatory knowledge and skills needed to reduce chargebacks. As a Relationship Manager with 10+ years’ experience at issuing banks and card schemes – including Visa, Lloyds Banking Group, and HBOS – McClure aims to eliminate the disconnect between merchants and banks that hinders the fight against payments disputes.


About Fi911

Fi911 supports financial institutions with innovative back-office management technologies created specifically for the banking and payments industries. By offering direct communications between FIs and their ecosystems, the company’s scalable payment product suite offers features that range from fast, flexible merchant onboarding to highly transparent, feature rich client portals and dispute processing. Established by the dispute experts at Chargebacks911, Fi911 offers global reach and expertise, as well as customised training and support from recognised industry leaders.


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Keywords: Chargebacks911, Fi911, chargebacks, merchants, financial institutions, ecommerce
Categories: Payments & Commerce | Ecommerce
Countries: World
This article is part of category

Payments & Commerce