The COVID pandemic has brought a lot of challenges, not the least of which are growing chargeback rates for merchants. Social distancing and online ordering have moved many credit and debit card transactions to web and mobile payments where the actual card isn’t dipped or swiped at the point of sale. The card brand rules that govern chargebacks and disputes protect the merchant from fraud losses when the actual card is present at the transaction, but fraud liability shifts from the card issuer to the merchant when a transaction is made without the card being presented.
Many restaurants and dining establishments that quickly shifted to a delivery/takeout model when unable to seat customers during the pandemic, continue to offer take out options and as a result see a portion of their card sales remain classified as card-not-present, or CNP in industry jargon. Similarly in traditional retail, the growth of Buy Online and Pick-up In Store, or BOPIS, has permanently shifted a portion of card transactions to CNP. As a result of these new ways of serving their customers, merchants are faced with having to deal with new types of chargebacks and disputes that were previously not applicable to their business model.
Kount, an Equifax Company and a leader in digital identity trust and fraud prevention, has published the first of its kind “Digital Payments in 2021: Opportunities and Chargeback Risks” survey. “The report reveals an opportunity for businesses to elevate their fraud prevention to better protect from the growing risk of chargebacks and the fees associated with them,” said Brad Wiskirchen, Senior Vice President and General Manager of Kount.
Supply chain interruptions and product shortages have also created shipping delays for many online orders, increasing the likelihood of customer-initiated disputes for products ordered but not received. E-commerce retailers are working harder than ever to ensure that customer expectations for delivery timeframes are communicated clearly to buyers.
Overview provided by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group