Is your bank ready for the influx of chargeback representments heading its way?
Consumers have an average of 120 days after the date of purchase to file a dispute and get funds charged back to their credit card accounts. A growing number of these chargeback disputes are considered “friendly fraud,” a practice where cardholders file illegitimate claims for financial gain. Yet, the impact to banks is not so friendly.
To stave off these significant losses on fraudulent chargeback claims, merchants have the burden of proving cardholders’ charges are valid by submitting a chargeback rebuttal letter with compelling evidence, known as “chargeback representment.” The goal of chargeback representment is to get a cardholder’s claim overturned when it is fraudulent and allow merchants to keep their revenue.
Here are a few ways banks can support merchants during the chargeback rebuttal process.
Understand the stakeholders
The representment process involves four main stakeholders:
The cardholder, who initiates a transaction dispute;
The card issuing bank (issuer), which electronically sends the transaction to the acquirer;
The acquiring bank (acquirer), which receives the chargeback and resolves it, or forwards it to the merchant;
The merchant, who decides to accept the chargeback or fight it by sending compelling evidence to the acquirer.
It’s a highly dynamic process with multiple variables that heavily relies on human intervention and can generate an enormous paper trail.
To meet tight deadlines of representment, the acquirer’s staff must quickly review the evidence sent by the merchant to determine if it meets the requirements before sending to the issuer, while also meeting regulations and compliance. For banks, faster review and response means faster resolution.
The challenge with documentation is merchants collect them from multiple sources and in various formats, which is often a manual process. This puts a significant burden on bank staff.
Supporting documentation can include delivery tracking numbers and proof of delivery, photographs, contracts, sales receipts and/or order forms, address verification, copy of a return policy with proof it is easily accessible on the merchant’s site, and any communication showing customer satisfaction.
Each document has unstructured data that requires your fraud department to manually comb through to identify pertinent information and input it into a database. Depending on your bank’s policies, you may have less than 30 days to respond to a rebuttal letter. More than a quarter of banks say allocating the time and resources for chargebacks is a challenge.
Applying artificial intelligence to automatically extract, classify and understand critical data contained in representment documents can improve accuracy and speed while freeing staff from such repetitive tasks. Many banks are using low-code/no-code document-processing platforms that allow them to drag, drop, and deploy into their existing applications to gather the critical information they need to prove a valid charge.
Intelligently automate manual processes
Representment process improvement is dependent on having complete visibility of the as-is process. Banks need to be able to discern patterns (specific merchants, common reason codes, types of transactions, potential fraud), prioritize incidents and provide evidence to regulators.
An objective way to get a true picture of how your representment process works is to leverage process mining, task mining and discovery tools. You get a digital twin of your process workflow and details about which steps take the longest, common variations and bottlenecks and provide recommendations to streamline the operations.
Going further, task mining will zoom in to how people are completing each step and the time between steps so you will have the information you need to improve staff training or revise the process. Improving visibility into documentation workflow and processes can increase straight-through processing so representments can be resolved fairly and quickly.
With 50 to 100 million transaction disputes occurring annually in the U.S., banks have an opportunity to be better allies to merchants when they’re submitting evidence to prove that a transaction was valid. It’s essential that the chargeback representment process operates efficiently and accurately. Intelligent automation tools can drive better business outcomes for all involved – banks, merchants and customers.
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