Page 27 - GS200302

CoverStory

Javelin Strategy & Research put the total cost of charge- Visa introduced a service called
backs at $31 billion in 2017, and estimates that for every $1
charge disputed by a cardholder, merchants and issuers, Visa Transaction Advisor, which
combined, incur $1.50 in added costs. What's more, a 2018 allows gas stations to tap into Visa's
survey by Javelin revealed that 63 percent of consumers
reduce merchant patronage following a chargeback inci- global risk intelligence network
dent. and can determine the risk of a

There's also the very real possibility that successful transaction within milliseconds based
chargebacks will embolden cardholders to file additional on cardholder and fraud trends.
chargebacks. "Our data indicates that if a consumer files a
chargeback and is successful, 50 percent of the time they
will file a chargeback again within 60 days or less," said Coronavirus and friendly fraud
Monica Eaton-Cardone, chief operating office at Charge-
backs911. While tools like VMPI and MasterCom and changing
chargeback rules may be helpful, Eaton-Cardone expects
Evolving brand rules friendly fraud to continue unabated, particularly in
ecommerce. "It used to be that about 50 percent of
Visa and Mastercard regularly issue changes to charge- chargebacks [in ecommerce] were friendly fraud; now it's
back rules, but the card brands have made significant upwards of 75 percent," she said.
changes over the past few years to streamline and simpli-
fy procedures around chargebacks. The card brands also One reason is what Eaton-Cardone describes as "an
have taken aim at so-called friendly fraud, which involves overarching sense of entitlement" on the part of consumers.
bogus chargeback claims, perhaps because the cardholder Ecommerce sites like Amazon have conditioned consumers
suffers from buyer's remorse or perhaps because another to expect instant gratification, and if they don't get it from
member of the household used the card without permis- the products and services they purchase, they often turn
sion. to their banks for recourse.

Recent changes include new automated tools and dis- She added that the problem could worsen as fears of
pute categories, a massive consolidation of dispute reason coronavirus spread, forcing airline and cruise ship
codes, dramatically shorter allowable response times, and cancellations and consumers to reevaluate travel plans.
new procedural requirements. "Imagine being a consumer who has saved money to
book a trip, only to have to cancel and discover there is no
Visa, for example, now uses rules-based models to assign refund policy. It could well result in a chargeback claim,"
liability for chargebacks for routine cases, dramatically re- Eaton-Cardone said. "It's an unfortunate situation. There's
ducing the number requiring issuer and merchant staff re- legitimate pain on both sides." But if airlines and other
sources to resolve. "What they [the card brands] have been travel services providers don't defend against these types
trying to do is automate the process so that things happen of chargebacks, they run the risk of encouraging such
more online and in real time," Baldwin said. friendly fraud, she suggested.

Two resources created recently to address friendly fraud Card issuers and merchants can discourage friendly
are the Visa Merchant Purchase Inquiry and MasterCom fraud by ensuring that filing chargebacks is not an easy
programs. They offer software tools that provide real- or costless process, Eaton-Cardone pointed out. Issuers,
time data exchanges between issuers and participating for example, could assess a cardholder fee or fine when a
merchants. merchant successfully defends against a chargeback.

Visa estimates about 3 million chargebacks are initiated Merchants, for their part, should take a more "tactical
each year simply because cardholders don't recognize approach" to fending off chargebacks, she added. Elements
transactions, which commonly occurs in ecommerce. of such an approach might include making return policies
VMPI and MasterCom address this by automatically easily accessible from every page of their websites;
providing issuers (and by extension the cardholders) with offering fast shipping, along with tracking and delivery
details about a transactions (such as product descriptions confirmation; providing bonus credits to customers
and shipping confirmations) in response to initial inquiries willing to exchange goods for store credit; and prompt
filed. "It makes the issuer be more aggressive in validating and always on (24/7) customer service access.
transactions," Baldwin said.

And the strategy appears to be working. "We have Patti Murphy is senior editor at The Green Sheet and self-described
merchants utilizing VMPI, and for those merchants we've payments maven of the Fourth Estate. Follow her on Twitter @GS_
seen reductions in disputes of up to 50 percent," Dakshina PayMaven.
said.

27