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Education

everyone, including banks and their customers. FIs can
play their part by being more proactive in communicating
with merchants. What's glaringly obvious to an FI may
be shrouded in mystery for a merchant, especially one
that's new to ecommerce. Examples include FIs advising
merchants on using additional transaction details to
improve authorization rates.

The 2021 Chargeback Field Report, (https://bit.ly/3fPai3F)
reveals a startling finding that goes right to the heart of
the problem: a third of merchants are unable to identify
friendly fraud attempts from genuine claims. The report
found that although merchants surveyed responded to
Knowledge is power 43 percent of chargebacks, the average net recovery rate
was just 12 percent, hampered by knowledge gaps in the
in the fight against chargeback management process.

This is problematic for several reasons. A merchant's
chargebacks chargeback win rate is indicative of revenue loss and other
chargeback-associated costs, along with the merchant's
By Monica Eaton-Cardone effectiveness at responding to chargebacks. Even if a
merchant responds to a chargeback, there's no guarantee
Chargebacks911 they will ultimately recover their funds.
Merchants can win with the right solutions
s the saying goes, knowledge is power. When it
comes to tackling fraud and payment transac- The biggest chargeback blind spots for merchants—
tion disputes, data is the weapon. But even as identifying the source of chargebacks and preventing
A chargebacks rise, merchants are not only strug- criminal fraud—are made worse when merchants struggle
gling to stop them, but also are simultaneously straddling to handle chargebacks in-house. What's clear from this
a knowledge gap between themselves and their financial year's Field Report is that many merchants, particularly
institutions (FIs). This gap is leaving merchants without smaller ones, just don't have the time or expertise to
the information and the tools they need to take control of challenge chargebacks successfully. This leaves merchants
chargebacks and protect their revenues. exposed to more claims, with disastrous consequences for
their profits.
If merchants don't have accurate data for representment,
they can't identify the origin of chargeback sources and Chargeback mitigation needs better data from a wider
criminal activity, and they waste their efforts fighting number of sources if merchants are to have a fighting
the wrong problems. These blind spots prevent effective chance. Third-party solution providers are linked to
mitigation of the problem. payment schemes and FIs across the board, with the
understanding and long-standing relationships to bridge
Merchants and FIs are being failed by their reliance on a large part of the knowledge gap.
disjointed processes, which are not keeping pace with
the evolution of payment channels and methods in Dedicated vendors are armed with solutions informed
the ecommerce age. Information that is currently kept by years of expertise, research and detailed data, which
segregated and siloed out of sight of merchants could can be parsed and analyzed much more effectively than if
be shared, helping payment ecosystem players to stop merchants were to attempt to do it themselves with their
chargebacks, own limited data sets. These solutions help connect banks
with merchant purchase information, which helps many
And the widening knowledge gap is leaving space inquiries to be resolved before escalating to a chargeback
for chargebacks to grow even further. The scale of the When all players in the payments ecosystem work
problem is frightening—not just in terms of financial loss, together, chargebacks are tackled and subdued much
but also reputational damage that could hit profitability more quickly and effectively than when players attempt to
even further. In 2020 alone, chargebacks were estimated chase chargebacks down on their own.
to cost an estimated $130 billion, as reported by Christina
Vukova in "61+ Ecommerce Fraud Statistics to Help You Merchants no longer need to fight blindly by themselves.
Say Safe in 2020," Review 42, Dec.13, 2019. We know that Encouragingly, the Field Report shows that merchants who
making better use of data is key to solving the problem. So know they need to tackle friendly fraud are increasingly
why isn't it being done more widely across the industry? looking outward and exploring new solutions and
This is not a problem just for merchants to tackle; it affects approaches. Around 20 percent of merchants are now

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