By Auriemma Consulting Group
March 2, 2017
Through an active marketing program, increased accessibility, and improved service levels, merchants can take control of the dispute flow – preventing unnecessary chargebacks and improving customer experience in the process.
When it comes to chargeback management, merchants have a lot at stake: The dollar amount of the transaction, the merchandise sold or services rendered, and processing costs – not to mention the customer experience.
Although EMV protections are limited to card-present transactions, they will help relieve fraud, the largest category of chargebacks. But a significant number of customer disputes stem from other sources. In fact, processing errors, billing problems, and other transaction issues drive more than 25% of volume. Because these chargebacks can erode both brand satisfaction and customer experience – and may be avoidable – it’s critical for merchants to be involved early in the conflict resolution process. But, while customer disputes directly impact retailers, most customers bypass the merchant and turn to their bank or card issuer to find a solution.
“This represents a missed opportunity for merchants to control the customer relationship at a critical juncture and preempt the chargeback process,” said Ira Goldman, Director of ACG’s Retail Payment Fraud Roundtable.
There is good news, however. Through an active marketing program, increased accessibility, and improved service levels, merchants can take control of the dispute flow. By adopting a few key tactics, merchants can more proactively process and resolve customer issues – preventing unnecessary chargebacks and improving customer experience in the process.
Here are three tactics we recommend:
1. Position yourself as the destination for customer disputes
ACG proprietary research shows that consumers are much more likely to contact their bank or card issuer than the merchant when problems arise. In fact, when dealing with fraudulent activity, just 14% of credit card users and 22% of debit card users turn to the merchant. Compare that to the bank or card issuer, which consumers contact more than 80% of the time.
There are a few reasons for this. Most banks offer, and actively market, 24/7 customer support, accept claims in a variety of channels, and allow customers to track the status of disputes in real time. Banks also enjoy prime real estate for advertising their customer service lines: the back of their payment cards. Merchants are at a natural disadvantage, a problem exacerbated by ineffective marketing of dispute programs.
“Cardholders know their bank is available 24/7,” Goldman said, “and may not realize they have other options. Merchants really have to market their accessibility and empower customers with information on the dispute process.”
Clear instructions on how to resolve an issue, dispute a transaction, and identify unauthorized charges should be easily accessible online, and merchants should consider rolling out self-service options or email servicing, which can offset limited hours of operation and remove friction from the process. In fact, digital channels represent a missed opportunity for disputes. Despite a clear shift in consumer preferences, more than two-thirds of claims issuers handle are filed over the phone.
2. Focus on key service levels
If a customer with a dispute contacts your customer service department directly, there are numerous pitfalls to avoid. Long wait times and repeat callbacks can cause customers to abandon the process and take more drastic measures, such as filing a dispute with the bank or card issuer – nearly half of which are ultimately charged back. To make matters worse, these interactions can damage customer experience, resulting in lost sales and reduced future contact.
“Customers who have had negative experiences in the past will turn to their bank for conflict resolution in the future,” Goldman said. “Even one bad experience can change behavior for good.”
Responsive and effective servicing, on the other hand, protects customer experience and brand trust, setting the stage for subsequent interactions. In the call center environment, that means an average speed to answer of 30 seconds or less, Goldman said, increased focus on first-call resolution rates, and a categorization process that can separate disputes from general inquiries. (If your organization is utilizing third-party service providers, dispute service levels should be set accordingly.) Merchants should also consider peer benchmarking to see how they stack up against industry norms.
3. Act fast, and keep customers informed
After the initial interaction, effective follow-up is key. Ongoing updates on the status of the dispute process and any refunds to be issued will improve satisfaction with the merchant’s response, and help avoid unnecessary disputes concerning merchandise returns or cancellations. And when it comes to those refunds, Goldman said, merchants should take action immediately and consider third-party solutions that credit the customer’s account on their behalf – in lieu of a chargeback.
“The power is in the merchant’s hands to take control of the dispute process,” Goldman said, “by responding swiftly and keeping customer experience at the forefront.”
About ACG Fraud Control Roundtables
ACG runs a series of information sharing and benchmarking groups for executives and managers in fraud strategy, operations, and credit originations. Spanning credit card, debit card, consumer banking, and retail payments, ACG’s fraud control roundtables combine executive meetings, industry-leading operational benchmarking, and peer group surveys to help leading companies identify vulnerabilities and optimize fraud management strategies. For information on membership, contact firstname.lastname@example.org.