Solving the Credit Card Dispute Conundrum
Credit card transaction volume over the past two years has exhibited a sort of pattern of the rest of the economy since the start of the pandemic – a sharp decline, followed by a rebound. Credit card transaction volume jumped 26% in 2021, and with this increase in card transaction volume comes a steady stream of transaction disputes and chargebacks initiated by customers who have been victims of fraud or who are confused or frustrated with their dealings. Disputed transactions are part of a new digital payments reality that is forcing merchants to be more proactive.
But too many merchants are hampering their efforts to resolve transaction disputes by relying primarily — and in some cases, solely — on dispute resolution tools they’ve developed in-house. These merchants operate on the mistaken presumption that their internal tools are more effective than external tools at reporting and resolving disputed transactions, including those that may be fraudulent. Data from PYMNTS, however, shows that traders who only use third-party tools limit their losses to 0.32% of annual revenue, while traders who strictly rely on in-house systems lost 0.46% of revenue. .
These are some of the findings of Dispute-Prevention Solutions: Protecting Profits and Customer Relationships With Third-Party Tools, a PYMNTS and Check collaboration that provides actionable insights to merchants looking for effective solutions to manage and resolve cardholder disputes. We surveyed 301 merchants who generated revenue from web and mobile applications in four business categories: retail, entertainment and games, travel and leisure, and digital subscription services, from December 7, 2021 to January 7 2022, about tools. they use to resolve disputed credit card transactions.
Some key findings include:
76% of merchants use third-party tools for alerts or notifications about disputed credit card transactions. This reliance on external tools indicates that merchants are aware that vendors specializing in these solutions offer the most effective tools for resolving cardholder disputes.
66% of merchants say they use third-party tools to reduce operating costs, illustrating the power of tools to improve merchant financial performance. Merchants are also using third-party tools to improve their customers’ post-purchase experience, indicating that these tools are effective in resolving disputes without harming customer relationships.
97% of businesses experienced both false positives for fraudulent card purchases and declined authorizations last year. Disputes with cardholders cost money to resolve and may result in the cancellation of sales made to resolve the dispute. Card-disputed transaction costs are one of the worst recurring problems merchants face.
Merchants understand that the best way to solve the problem of disputed credit card transactions is to use effective tools that first alert them to disputes and then help them resolve them cleanly without loss of revenue or damage to ties with customers. However, many traders may not fully understand which tools are best suited for these tasks and instead rely on those developed in-house rather than the more efficient tools available from third parties.
To learn more about merchant strategies for using third-party tools to resolve disputed credit card transactions, download the report.