Advancing technology for fraud prevention

When a customer sees a charge that they don’t recognise on their credit or debit card statement, often their first reaction is to contact the bank directly, requesting the transaction to be reversed. These disputes often lead to the issue of a refund, or chargeback, as it is often not deemed cost effective for banks to open an in-depth investigation and they lack the transaction information to legitimise the sale or satisfy the cardholder promptly.

Verifi’s research has shown that up to 86 per cent of cardholders take this route when disputing transactions and the problem can quickly scale up. Merchants are not only hit with the cost of each reversed transaction, but there is added impact in the form of various fines, fees and related operational expenses, not to mention the resulting long-term damage to customer relations.

A large volume of chargebacks that merchants are routinely landed with is commonly referred to as “friendly fraud”. In these cases, the customer is genuinely responsible for the transaction in question, but either fails to recognise it or decides to pursue the dispute, since they are aware of these weaknesses in the system and know that such claims remain unchallenged.

Be it due to fraud or non-fraud disputes, most of the time merchants are informed of these chargebacks when it’s already too late to resolve them without incurring added costs, damages to customer relations and lost sales.

To tackle these challenges effectively, innovation in technology is needed to align the interests of cardholders, issuing banks and merchants better, to bridge the order information at the time a customer initiates a dispute.

Verifi has developed solutions that address this growing problem holistically. Firstly, Verifi’s Cardholder Dispute Resolution Network (CDRN) integrates directly with the top issuing banks and pauses the dispute process for up to 72 hours. The cardholder dispute is redirected through the CDRN patented “closed loop” platform from the bank to the merchant in near real time. This allows merchants time to assess and resolve the issue appropriately before it becomes a chargeback, which works equally well for both fraud and non-fraud dispute resolution.

Verifi’s CDRN supports more than 15,000 merchant accounts and handles over 200,000 individual disputes each month.

Whenever a dispute arises, all parties are able to access information to eliminate customer confusion, determine the legitimacy of the sale and reduce so-called friendly fraud

In addition, Verifi recently launched Order Insight, a service that enables near real-time sharing of robust transaction details between cardholders, merchants and issuers. Whenever a dispute arises, all parties are able to access this information to eliminate customer confusion, determine the legitimacy of the sale and reduce so-called friendly fraud.

By being able to share and access data, such as purchase item description (size, colour, style), date of purchase, merchant’s name and contact information, customer’s device used, IP address and so on, the volume of chargebacks can be significantly reduced. This results in fewer fees and penalties imposed on merchants, but most importantly the retention of sales and improved customer relations, all of which translate into increased profits.

For companies to succeed in the future, automation and continual innovation will be key. This is necessary to keep pace with new technologies, from encryption to the internet of things, as well as big data and artificial intelligence now emerging in the payments ecosystem, and to also anticipate evolving industry demands. Getting this right is vital to provide merchants and consumers with a better experience by reducing instances of fraud, and thereby save the industry billions in avoidable losses.

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