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Education

Managing disputes for Disputes are an unavoidable part of
business in the payments space, but
real-time payments their occurrences and costs are rising.
An October 25, 2022 report by Mer-
chant Fraud Journal found charge-
By Dr. Jack T. Baldwin backs are growing at an annualized
BHMI rate of 1.5 percent and are expected to
top $100 billion in 2023. A recent sur-
isputes and chargebacks have long been a challenge for credit vey by Internet Retailing also discov-
card issuers and merchants, leading to billions of dollars in annual ered chargebacks rose significantly
losses. Yet as more of the economy adopts real-time payments, in 2022 and continue to rise due to
D disputes will become even more costly and complex. New POS economic conditions. Forty-four per-
systems and interfaces enable real-time payments. However, many merchants cent of consumers that filed a credit
and providers still operate with legacy back-office infrastructures that can take card chargeback in the past year did
hours to settle transactions. This gap between payment and settlement leaves so because they didn’t receive goods,
them without a true real-time payment system, and it diminishes the customer while 25 percent filed a chargeback
experience and opens the door to fraud. To prepare for growth in real-time because they disagreed with the com-
payments, processors need a modern back-office system that can research pany’s values or policies.
transactions, manage disputes and track activities in real-time. Real-time payments,
Payments in dispute real-time fraud

Disputes can impact any company that processes payments. A dispute can Growth in real-time payments will
occur for many reasons, including merchandise not being received, dam- make disputes more challenging to
aged merchandise, merchant errors or buyer's remorse. Many disputes lead manage. Real-time payment methods
to chargebacks where the bank reverses the charge. Typically, merchants are add complexity to disputes because
deemed liable for chargebacks, with the burden on them to make the case why everything happens instantly.
it should be reversed.
New payment platforms now offer
real-time or near-real-time payments
for P2P, payroll adjustments and
account-to-account transfers. But be-
cause these payments happen almost
instantly, consumers and merchants
have less time to address disputes or
recognize fraudulent transactions.
In the United States, Congress and
regulators are taking a closer look at
how to better protect consumers from
real-time payments fraud, according
to American Banker.

While checks, cards and ACH pay-
ments have built-in methods to re-
imburse consumers for fraud or to
handle returns, most real-time pay-
ment networks don't have established
channels to expedite these requests.
For example, as P2P payments are
relatively new to the market, dispute
regulations and procedures are in
early stages of development. Tradi-
tional payment settlements may take
longer, but their well-established and
well-defined dispute processes give
consumers and businesses a greater
understanding of the risks and trust
that disputes will be resolved. This
gap in settlement time and unclear
refund policies increases the risk of
fraud and diminishes the customer

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