3 ways how merchants can manage card disputes smartly.

2019 has been an expensive year in the history of online fraud and the future is expected to be even worse. Fraud is on the rise, and with it, disputes followed by chargebacks. Disputes will represent 25 million items by 2022 as U.S. credit cards approach 70 billion transactions (Source: Payments Journal).

Quite a scary situation...Isn't it? One cannot avoid the fact that online payments are the future today, but the question is - Do merchants have foolproof anti-fraud defenses in place? Are they thinking enough to identify the critical process enhancements that can avoid unmanageable frauds and chargebacks? Fraud and disputes, if not addressed accurately and within the stipulated time frames, can eat into a merchants’ revenue and also impact customer service and loyalty. Let's look at some business challenges that merchants face today and three smart ways they can mitigate them.

Merchants are still struggling… Worldwide card fraud losses - including losses incurred by the card issuer, merchants, merchant acquirers and acquirers of card transactions at ATMs - stood at $27.85 billion in 2018 and is projected to rise to $40.63 billion in 10 years according to The Nilson Report, a leading global card and mobile payments trade publication. Among the types of fraud reported, friendly fraud seems to be the most rampant kind of fraud and one of the most difficult frauds to identify and resolve. One of the main reasons why merchants struggle with chargebacks is that they have trouble identifying the right reason codes and provide compelling evidence to fight chargebacks.

How do merchants manage dispute transactions?

1. Technology – Many merchants have opted to leverage chargeback management solutions that help identify and process chargebacks. However, no system is 100% foolproof and a reasonable amount of manual review is needed to manage the exceptions thrown out by the system.
2. In-house manual review – Manual reviews of disputed transactions is extremely time consuming and can become a costly affair for merchants. Most merchants try to have an in-house team help with real-time manual reviews. However, this requires experienced resources that all merchants may not have in-house, and it also adds to fixed costs, as the amount of resources needed may be seasonal in nature.
3. Outsourcing/Partnering with third-party service providers While some merchants have outsourced the complete dispute review processes to third-party service providers, others have opted for a hybrid model where the third-party service providers augment the in-house fraud review teams to help resolve the disputed transactions faster and prevent chargeback case aging.