The Evolving Landscape of Chargeback Management in the Digital Payments Era

Chargebacks, once a straightforward consumer protection mechanism, have morphed into a complex digital payment challenge. With the advent of eCommerce and the rise of digital transactions, businesses are grappling with increased instances of chargebacks, friendly fraud, and the need for effective dispute resolution.

As we delve deeper into this evolving scenario, it's crucial to understand the key components that shape today's chargeback landscape, including the latest initiatives by payment networks, proactive prevention strategies, and the sophisticated tools available to combat these challenges.

Compelling Evidence

Visa Compelling Evidence 3.0: A Game-Changer

Visa's Compelling Evidence 3.0 initiative significantly advances how merchants can respond to chargebacks. This program provides clearer guidelines for merchants to present compelling evidence, thereby improving their chances of successfully contesting unjustified chargebacks.

Mastercard First-Party Trust: Strengthening Merchant Positions (Coming 2024)

First-party data for Mastercard significantly aids in disputing chargebacks by providing essential information. This includes transaction history details, account information, card usage patterns, location data, user profiles, and customer feedback. This data enables Mastercard to effectively investigate and respond to chargeback disputes, offering evidence to validate legitimate claims or refute unauthorized or fraudulent transactions. It plays a pivotal role in resolving disputes and helping ensure fair and accurate outcomes.

These new rules have been introduced to establish clear criteria for compelling evidence, aiming to improve the identification of legitimate transactions and reduce unwarranted disputes. These rules also encompass merchant chargeback protection for cases that adhere to the First Party Trust data-sharing criteria, further enhancing dispute resolution processes.

Mastercard offers merchants and card issuers two options to exchange these improved insights. Merchants can either include the enhanced data directly within the transaction or share it after the transaction as part of the dispute resolution process.

Best Practices

Friendly Fraud: Tackling the Invisible Threat

The shift towards digital payments necessitates evolving how businesses handle transaction disputes. As transactions become increasingly digital, the strategies for managing chargebacks must also adapt to this new reality.

Friendly fraud, where customers make false transaction claims, poses a unique challenge. Combating this requires a blend of technology for detection and tactful customer service to address disputes without harming customer relationships.

Examples of friendly fraud:

• A customer buys a TV at franchise store A but returns it to franchise store B. They get a full refund for the TV at store B and simultaneously file a chargeback, which is returned from store A. Because the stores use different MIDs, the customer gets a double refund. See our article about double refunds.
• A group of agents decided to use pre-paid credit cards to fabricate more sales. The agents are offered a lump sum of commission for each sale, based only on the first sale payment going through,  So they make the first payment using the pre-paid card. They get 100% of the commission, file a chargeback to get the amount of the pre-paid card back, and all future charges are declined automatically.
• A handful of smart fraudsters scheme a gift card marketplace by using bots to make hundreds of purchases, collect the gift cards, then file chargebacks on all the purchases and keep the gift cards.

These examples show how friendly fraud can take many forms. It is up to the merchant to use their data to their advantage to see where and how they are being manipulated. Fraudsters are getting increasingly creative in how they game the system. Leveraging the data and rules can give merchants an advantage in preventing fraudulent chargebacks. MidMetrics’ comprehensive analytics solution can help.

Chargeback Management: The Core of Digital Transaction Health

Effective chargeback management involves more than just handling disputes as they arise. It requires a proactive approach, incorporating prevention strategies, timely resolution, and ongoing monitoring. This becomes especially important with the increasing trend of digital payments, where transaction disputes are more frequent.

Proactive Chargeback Prevention: The First Line of Defense

Preventing chargebacks starts with understanding the common causes and implementing measures to mitigate them. This includes employing advanced fraud detection tools, clear customer communication, and secure transaction processes.

Dispute Resolution: Balancing Efficiency and Fairness

When disputes do occur, efficient and fair resolution is key. This involves understanding the rules set by payment networks, having a system in place for quick and effective evidence gathering and submission, and being an expert. Resolve more chargebacks by using a third-party dispute resolution authority like MidMetrics.

MidMetrics: Your Partner in Chargeback Management

MidMetrics Intelligent Chargeback Management Software stands out as a comprehensive solution in this complex environment. By integrating chargeback prevention, dispute resolution, and analytics into a single platform, MidMetrics simplifies and strengthens the approach to managing digital payment disputes.

In conclusion

The landscape of digital payments is constantly evolving, and with it, the challenges of chargeback management. Staying ahead in this arena requires awareness of initiatives like Visa Compelling Evidence 3.0 and Mastercard First-Party Trust and the adoption of integrated solutions like MidMetrics that streamline the process and empower businesses.

Want to learn more?

Discover how MidMetrics can transform your chargeback management approach, integrating key prevention, resolution, and analysis strategies. Learn more in our comprehensive white paper.