The enormous potential of the chargeback process for efficiency gain: A short guide for Issuing Banks

In our previous post, we wrote about the importance of chargebacks for card payments and how cardholder self-servicing can turn chargebacks into a pleasant experience for cardholders.

This post focuses on how issuing banks and processors can improve efficiency in the chargeback process by automation and end-to-end digitalisation.

Why is it essential to improve the efficiency of the chargeback process?

The volume of chargebacks is increasing.

With the rapid growth of e-commerce and the increasing number of purchases with debit and credit cards, the volume of fraud and dispute chargebacks are increasing (1, 2). While the pandemic had a big impact, disputes were increasing even before COVID-19 (3, 4). Therefore, an efficient process with quality assurance to handle the increasing volume of disputes is essential for the continuity of this process.

Most issuers agree that their existing internal processes and chargeback solutions used do not allow the process to run efficiently and thus they are looking into improving it (5). Without an improvement in the process and tooling, there is a risk of loss (e.g., increased write-offs) and increasing personnel costs (6).

Chargeback is a time-sensitive process.

Every step of a chargeback life cycle (from issuer-merchant collaboration (Ethoca & Verifi) to Arbitration) has a timeframe and a deadline. The better issuing banks can optimize the process, the faster and more efficient the chargeback team can work. As a result, fewer deadlines are missed, and the issuer will bear less loss (from write-offs).

A better chargeback experience translates into improved cardholder satisfaction.

An efficient dispute and fraud process can enhance customer service and enable issuing banks to stay ahead of the competition. In addition, with an efficient process, the protection offered by chargebacks can be highlighted more prominently as an advantage of card payment, leading to card portfolio and transaction volume growth.

How to improve efficiency & save cost in the chargeback process?

We identified six areas that the issuing banks can work on to improve the efficiency of the chargeback process.

1. Go end-to-end digital: Digitalising the process cannot be achieved by merely providing a digital version of the dispute form in your app or portal. Issuing banks should offer cardholder self-servicing that can guide cardholders to raise a valid and complete dispute.
2. Automate side processes: Whether it's blocking a card, issuing a replacement card, triggering merchant collaboration, crediting or debiting the cardholder, all of these steps can be automated so that your chargeback team can get more chargebacks done in their time rather than taking care of all side processes for each chargeback.
3. Bulk Decision: There are several scenarios (especially in the fraud domain) where the same task has to be done multiple times (examples: creating new chargeback cases, reporting fraud or submitting chargebacks). Using chargeback tools that can help the team to do a task once for numerous cases will vastly save you time.
4. Make the most out of collaboration platforms: Thanks to merchant collaboration platforms like Ethoca and Verifi, you can now prevent going through the costly chargeback process. Why not move one step further and use such a platform to avoid unnecessary time-consuming chargebacks. Ethoca and Verifi can provide valuable insight about a transaction, which goes way beyond the transaction data. Such insights can be presented in a friendly way to cardholders to help them identify a transaction and avoid raising an unjustified dispute.
5. Think beyond a manual chargeback submission: In many cases, especially fraud chargeback ones with no cardholder identification (so-called non-authenticated card not present), the chargeback case is pretty simple. Why not use such cases to start building automated chargeback submission so that the chargeback team can spend their time and skills on more complex chargebacks.
6. Decouple chargeback from payment processing: Traditionally, most chargeback products require tight coupling with the processing system. Before the schemes enhanced their platforms (VROL and MasterCom) and introduced modern system interfaces a few years ago, the chargeback clearing message had to be prepared/created and transmitted to the Scheme network by the issuer/processor. Therefore, the chargeback processing system was either part of the processing platform or closely connected to it. However, with the enhancement of schemes platforms, it is now possible to decouple chargeback processing from payment processing. With the increasing number of chargebacks, there is a need for improvement, but as long as your chargeback system is tightly integrated with your payment processing, changes and innovation in this area are complex, costly, and time-consuming.

Need a little help?

At Rivero, we have worked on all these areas because we care about improving the chargeback process. Our mission is to make this process as efficient as possible and help issuers cut costs and improve their customer services.

If you would like to know more about our SaaS chargeback product, called amiko (means friend in Esperanto), get in touch. We can organize a demo and share our experience with you.

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