Speeding up chargebacks reaps dividends for business, FIs

By Gaurav Mittal, Executive Vice President, Ethoca

The speed of commerce is exhilarating. Recent data shows overall US retail sales are up 8.8% yearly, with e-commerce specifically up 8.4%. With resilient consumer spending since the start of the year, it’s inevitable that, against this backdrop, there will be challenges to address.

Take, for example, the rise in purchase confusion where a list of unfamiliar names or references on bank statements next to outgoing payments appear – leading a consumer to mistakenly request their money back from their bank. These sorts of requests – known as chargebacks – are extremely costly and time-consuming for all involved. Given the average chargeback costs businesses $191, and there are an estimated 615 million chargebacks worldwide per year, we can estimate that chargebacks cost businesses $117.46 billion annually.

Understanding chargebacks and finding solutions

Chargebacks are not only costly, but the process is also complex. Therefore, businesses and financial institutions must address today’s changing consumer behaviors and reduce chargebacks from impacting their bottom line through attrition and transaction costs.

A crucial part of the solution is making transaction information clearer for everyone. Recent data shows that almost all consumers want their bank to increase clarity by providing more transaction detail. This can be as simple as adding a logo or using digital receipts for each outgoing payment, helping jog customers’ memory and

significantly reducing confusion. For financial institutions, a digital-first approach is the best prevention method as it enables them to address more disputes earlier in the process, well before they become a formal chargeback.

However, When chargebacks occur, an alerts-based system can receive fraud data from issuers in real-time rather than days or weeks after processing. Take the example of a leading US-based card issuer who addressed this. They were experiencing a growing volume of chargebacks, and combined with the changing nature of fraud, they were spending an unacceptable amount of time and money addressing these problems.

Automating the chargeback and fraud processes was an obvious solution: a digital solution could scale along with sudden surges in chargeback volumes, required no new staff or training and would be faster and more accurate than challenging chargebacks ‘by hand’ The company also had multiple subsidiaries who needed an anti-chargeback solution.

An alerts-based system helped this leading financial institution. The use of near real-time data transformed its chargeback prevention and management program and has helped the issuer prevent $8 million worth of fraudulent and non-fraudulent chargebacks over 12 months. The solution’s automated and scalable nature also allowed this issuer to handle its monthly volume of disputes more efficiently while still meeting customer expectations.

Benefits of quicker chargeback resolutions

By taking steps to prevent and streamline chargebacks, businesses and financial institutions can reap significant benefits. First and foremost, they can reduce the financial impact of chargebacks. This is especially important for smaller companies that may not have the resources to absorb the costs associated with chargebacks.

Secondly, they can improve the overall customer experience by providing better customer service, building customer trust and enhancing customer loyalty.

To achieve these goals, businesses should consider a comprehensive strategy around collaboration and technology. Doing so can reduce the risk of chargebacks, improve their operations, and ultimately reap dividends through increased profitability and customer loyalty.

Building trust in the long term while retaining customers

Ultimately, resolving issues is key to the overall customer experience. Enhancing the customer experience can help reduce transactions, lower dispute costs, and increase customer retention. In turn, this will boost the Lifetime Value, create trust with consumers and help to encourage a long-term relationship.

About the Author

Gaurav Mittal is Executive Vice President of Ethoca, a Mastercard company. Gaurav focuses on executing and evolving Ethoca’s global strategy to help businesses reduce fraud and disputes and create better digital customer experiences. Gaurav joined Mastercard in 2014. Prior to his role at Ethoca, he led Global M&A for Mastercard. He has also held leadership positions across Product Development and Enterprise Strategy. Before Mastercard, Gaurav worked at Booz & Company, helping customers develop and focus on their strategic initiatives. Gaurav previously worked as a senior executive at GEP, a B2B procure-to-pay technology company, where he oversaw the firm’s rapid growth. Gaurav received his MBA from Columbia University and an undergraduate degree in Computer Science from Denison University.

About Ethoca

Ethoca is an award-winning provider of collaboration-based intelligence and technology solutions that empower businesses worldwide to fight fraud, prevent disputes and improve the customer experience. The ever-growing Ethoca Network provides rich intelligence throughout the customer purchase journey and closes costly communication gaps between all stakeholders in the payments ecosystem. These include thousands of the world’s biggest e-commerce brands, the largest banks, service providers and consumers. For the first time, fraud, customer dispute and purchase insights are now available and actionable in real-time – delivering significant revenue growth and cost-saving opportunities. Mastercard acquired Ethoca in April 2019. To learn more, visit www.ethoca.com.