The issue of payment disputes between merchants and cardholders is a controversial topic that has consequences for both parties. The current system is skewed in favor of cardholders, as the focus has been on expanding cardholder protections rather than considering the merchant perspective. While protecting consumers against fraud is necessary, the ease with which cardholders can dispute charges has led to an increase in friendly fraud, which costs merchants billions of dollars annually. The burden of responding to a dispute largely falls on merchants, who often find it difficult to defend themselves.
To address this issue, a collaborative solution is needed that benefits all parties. One potential solution involves leveraging technology to better inform chargeback decisioning, streamline operational bottlenecks, and reduce friendly fraud. Encouraging merchants to respond to all cases and share data with banks could provide institutions with a more accurate picture of fraud, reducing instances of criminal fraud and false declines. Additionally, modernization could allow merchants to transmit raw data in a globally standardized format, reducing errors and the number of employees required to process disputes.
Striking a balance through technology is a “win-win” that benefits cardholders, banks, and merchants alike. Advocating for technological solutions that align with the needs of all parties is the key to solving conflicts and creating a more viable system. The current system cannot sustain itself, and it’s time to try new ideas.