How to delight your cardholders when it counts the most? The case of fraud & disputes
The importance of chargebacks for card payments
Payment networks like Mastercard, Visa, and Amex have established chargeback processes with a zero liability rule to protect cardholders in cases of fraud or when there is a problem with the merchant fulfillment of the cardholder’s purchase. While the process is in place and the cardholder’s rights are protected, going through a chargeback process is an effortful and sometimes stressful experience for the cardholder.
In this first article of a series on chargebacks, we look into how payment card issuers and /or banks (from now on, “banks”) can turn these stressful experiences into positive ones and, by doing so, gain customer loyalty and increase customers’ trust in their payment products.
Today’s chargeback experience for cardholders
Identifying a problem with a transaction
Thanks to digitalization in banking, most banks now offer digital interfaces (apps or portals) so that their customers can see their transactions and benefit from digital banking services. This means that cardholders might notice a fraudulent transaction on their card earlier than the bank’s fraud team manages to reach out to the cardholder, or they are immediately aware of a problem with a transaction.
The Reach-out to the bank
As soon as the cardholder notices a problem with a transaction, they try to reach out to the bank to report it. From a cardholder’s perspective, the process should be done after reporting the problem. However, typically, it takes more than just a simple call or e-mail to customer service. For example, for a fraud case, the process involves talking to the call centre, then talking to someone from the fraud department to answer a few questions, then receiving a letter from the bank to confirm that the reported transaction was fraudulent and sending it back to the bank. For a dispute with a merchant (e.g., service/product not delivered), the process involves filling out a long, complex form and sending it with information on the purchases, previous communication with the merchant, etc, to the bank. Due to process lead times and the response periods for merchants, customers then have to wait for several weeks until they get feedback from the bank.
The chargeback process at the bank
The chargeback process at the bank starts by reimbursing the cardholder on a provisional basis, filing a chargeback towards the merchants’ bank, and issuing a new card for the cardholder in case of fraud. There might be some back-and-forth communications (often letters) between the bank and the cardholder for additional information or confirmation. Depending on the work backlog of the bank, this process can last anywhere from a few days to a few weeks or months.
The problem with today’s process
Nowadays, customers have much higher expectations regarding the response time to their requests. We live in an era of on-demand services, quick responses, and real-time status updates. However, when it comes to the chargeback process, which has been established in the first place to benefit cardholders, the experience is far from quick and pleasant; on the contrary, it can lead to frustration and negative emotions for cardholders. As this happens in an already stressful event, the bank should aim to reduce friction and cumbersome administrative hurdles.
Turning chargebacks into a cardholder self-service with a pleasant user experience
Leveraging digital channels for cardholder self-servicing
In the same way that the cardholder sees a problematic transaction in their banking app or portal, they could also report it to the bank. However, this does not mean merely offering the cardholder a digital version of the existing chargeback form to fill out. Instead, the cardholders should be guided in an easy way and in the language that they understand. The required information and the cardholder’s statement regarding the transaction can be collected and automatically verified through such a conversation. In case of a legitimate claim, a digital fraud or chargeback case can be created and displayed to the chargeback analyst at the bank to start working on it. This means an end-to-end digitalization of the process from the cardholder to the chargeback analyst, thereby eliminating administrative hurdles such as letters, calls, or emails and reducing friction.
Such a conversation can be designed in a way to improve the cardholder experience but also to avoid unjustified disputes. As a result, the information collected from the conversation can help to avoid unnecessary follow-up communications with the cardholder. Resulting in a win-win situation for both the cardholder and the bank.
Keeping cardholders updated throughout the process
As mentioned above, the current process may take up to a few months, especially a dispute with a merchant. This usually results in follow-up calls from the cardholder to inquire about the status of their dispute, which means an additional workload for call centres. When the process is fully digitalized end-to-end, any update on the dispute can be automatically communicated to the cardholder in the app or portal to avoid unnecessary calls. In the same way, the digital channel can be used to collect additional information from the cardholder, if needed, throughout the chargeback process.
Implementing and using such a bidirectional conversation channel is a fundamentally different approach than the commonly seen concept of turning an existing chargeback form into an online form.
Acting even more proactively and avoiding fraudulent transactions
While chargebacks are not limited to fraud chargebacks, statistically, the majority of chargebacks are driven by fraudulent transactions. With the advancement of fraud detection systems, the bank automatically detects most fraudulent transactions, and then the cardholder is contacted by the fraud team by telephone or letter. Reaching out to cardholders is usually not easy or quick. With a digital channel in place, the cardholder can be contacted via a push notification to the banking app to confirm whether a transaction is fraudulent. In the case of confirmed fraud, the chargeback and recovery process can be started without the cardholder's initiation.
Besides an improved customer experience, this quick feedback process helps banks train or adjust their fraud prevention models on more accurate data and prevent similar fraud patterns on other cards.
The future of chargeback
The future of chargebacks can be far better than what it is today. While the actual chargeback processes offered by banks today are cumbersome, frustrating, and inefficient, there is an excellent opportunity to turn it into a pleasant customer experience that will increase customer loyalty and strengthen the value proposition of card payments.
Helping the cardholder or even positively surprising the cardholder in the context of an effortful and stressful event, will be remembered and valued.
If you want to leverage the hidden potential of chargebacks and turn them into a USP for your payment cards, check our website and contact us.
In the next article of this series, we will explore how digitalization of the chargeback process can improve productivity in the back office process in terms of efficiency and speed of handling the increasing volume of chargebacks.
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