Technology Is Changing Chargeback Fraud and Authentication

Chargeback Management: What’s changed in the last 5 years and How Technology Is Driving Change

Jeffrey Wixted

Dec 6, 2021

This article summarizes information and findings from the Accertify-sponsored 2021 Javelin merchant survey and report, “Merchant Chargebacks: Building Brand Value by Optimizing Efficiencies.1” Here we examine the common challenges related to chargebacks and how merchants are implementing technology to improve win rates.

Both revenue and client experience are at risk when chargebacks overwhelm retailers. Operationalizing chargeback management is a consistent challenge, according to merchant respondents in the Javelin survey[1]. The volume of chargebacks is increasing faster than win rates which some credit to the COVID-19 pandemic. Whatever the cause, there are tools available to help merchants better combat chargebacks, but not all merchants are using these tools.

Read on to see how technology is driving change:

  1. A comparison between a 2015 merchant survey[2] and the 2021 merchant survey1 on chargebacks and fraud.
  2. Recommendations for how merchants can adopt best practices to protect their organizations.

2015-2021: New Chargeback Processes for Online Merchants

Accertify conducted a similar survey similar in 2015, and the reports from online merchants underscore the changes in chargeback management.

Sixty percent of respondents report that eCommerce channels have the highest chargeback rates. ECommerce is particularly vulnerable to chargebacks with 33% of survey respondents saying they regularly face disputes about merchandise not delivered or services not rendered. Inadequate eCommerce provisioning and tracking systems may account for some of these issues. For merchants already struggling with antiquated dispute resolution products or low staffing, higher loss rates may occur on online channels.

Tracking Friendly Fraud

According to the Javelin study in 2015, 54% of merchants tracked friendly fraud, while 46% did not. In the 2021 Javelin study, 82% of merchants tracked friendly fraud, while only 18% did not. This prioritization has taken hold, as merchants increasingly understand the importance of detecting friendly fraud, transaction confusion, buyer remorse, and refund abuse to name a few.

3D Secure

In 20152, 32% of merchants used credentials for 3D secure. In 20211, 54% of merchants used 3D secure. Between 2015 and 2021, merchant adoption of additional security layers for online debit and credit card transactions, known as three domains (3DS), has increased by 69%. 3DS refers to the three domains that interact during security protocol: the issuer domain, the merchant/acquirer domain, and the interoperability domain. This form of digital payment security is effective but requires ongoing refinement as cybercriminals adapt new workarounds. This increase reflects an improved understanding of the importance of authentication by merchants.

Recommendations to Improve Chargeback Management

It is widely agreed that chargebacks are not fully preventable, so the goal for merchants is to implement tools for both avoidance and automation of the representement process. Chargeback resolution requires integrated tools and as much automation as possible to collect and filter data effectively.

Sifting through a sea of daily transaction data to see the red flags of chargebacks exceed most companies manual capacity. That is why chargeback tools must enable merchants to hone in on areas of actual concern, and then provide easy access to evidence if they choose to respond to a dispute.

For many merchants, the data may exist within their system, but as many as 46%1 of them shy away from doing so. In fact, according to the 2021 Javelin survey1, 64% of merchants feel that most chargebacks present little opportunity for recovery. The right tools can give merchants the confidence to handle disputes with solid evidence.

Based on survey results, the chargeback fraud management experts at Accertify have assembled these 12 tactics to improve chargeback management:

  1. Improve the digital experience for consumers.
  2. Empower the entire client service organization to fully serve the customer.
  3. Consider integration of third-party chargeback management systems.
  4. Integrate dispute management processes to help eliminate the need to constantly retune the chargeback process.
  5. Explore automation from dispute receipt to final resolution.
  6. Track compliance changes closely.
  7. Increase data collection efforts to increase win rates.
  8. Develop strong reporting metrics.
  9. Scale to meet growing demands for superior client experiences.
  10. Identify bottlenecks to help improve in-house workflow efficiency.
  11. Monitor brand, network, and processor updates closely.
  12. Build a support library that contains all of the necessary documents required to complete the chargeback process.

Chargeback protection is explored in greater detail in the 2021 Javelin survey1, which can be downloaded here.

Accertify’s Technology and Tools for Chargeback Protection

Merchants around the world have to adapt to a changing security landscape. As new regulations are instituted and new guidelines are released, it is increasingly difficult for merchants to manage chargetbacks without a trusted partner. Accertify Chargeback Management is proven to protect and support the leading global merchants, responding to millions of disputes annually.

If your team is ready to streamline chargeback operations and improve win rates, request a consultation today.

1 Javelin Survey 2021 – Merchant Chargebacks: Building Brand Value by Optimizing Efficiencies – July 2021

2 Javelin Survey 2015 – Merchant Chargebacks: Building Brand Value by Optimizing Efficiencies