The cards and payment services sector has experienced a sharp increase in volumes (in line with the fact that cash & check transactions are declining). Card payments are one of the most widely used payment options for both offline and online payments.
As expected, payment fraud is also increasing. Losses from card fraud worldwide have been rising, and they now appear to be doing so rapidly. In 2021, it was estimated that there would be greater than USD 32 billion worth of malicious card payment activities worldwide. The reportpredicted that by 2027, the number would rise to $38.5 billion.
Value of fraudulent payment card transactions worldwide from 2021 to 2027(in billion U.S. dollars) Source: Statista
Card theft has been one of the most significant hurdles for key stakeholders in the industry, such as card service providers, merchants, and acquirers, with card issuers generally enduring 62% of liabilities and merchants bearing 38% of losses. Merchants are finding it problematic to meet the truncated disputes and refund resolution time restrictions as dictated by Visa Claims Resolution (VCR) and Mastercard Dispute Resolution (MDR) rules. In many cases, merchants that are physically evaluating these transactions have less than 30 days to draft and send a dispute rebuttal. Merchant acquirers/ payment processors serve as the entity that merchants and card networks look to for quick resolution. As a result, it is critical that they resolve disputes speedily, proficiently, and accurately.
In the process of conducting business, institutions gather enormous volumes of data, which can be utilized to identify suspicious activities and forecast probability and trends. Predictive analytics can now make reasonable estimates of the amount of fraud that will occur, although it may not be able to identify the specific form of fraud.
So, how do merchant acquirers manage volume & fraud surge?
To assist issuers and merchants with speedier and easier dispute settlement, a few of the biggest acquirers have made investments in dispute technologies that help resolve issues quicker. But this level of investment may not be possible for medium and small acquiring organizations, who make up a significant portion of the payments ecosystem in the country. These smaller organizations often have an internal team that is responsible for resolving these disputes.
These in-house teams can manage to resolve the steady flow of disputes but are compelled to boost their existing staff during periods of a surge in disputes (seasonal or even monthly increases, for instance, or due to unforeseen events like a pandemic) just to comply with the regulatory timelines for resolution. If they cannot increase staffing, then they have difficulty meeting the required timelines.
But additional resources also increase fixed expenses, which might not be used during the lean period and hence lower their overall profitability. To manage, several merchant acquirers and payment processors are now collaborating with third-party solution providers to avoid these issues.
The possibility of outsourcing dispute resolution
Acquirers are always working to provide their merchants with better customer service, quicker turn times, as well as competitive rates. This is a necessity as merchant attrition is very common in the industry.
While attempting to outsource dispute resolution, they seek to collaborate with solution providers who are seasoned and deeply knowledgeable about dispute resolution, and also with fraud related to dispute settlement. Knowing the most recent categories and appropriate conflict reason codes enables the acquirer to successfully address both merchant claims and issuers within the strict deadlines for settlement. By utilizing the "pay-per-click" price alternative that some established service providers give, the acquirer can further reduce operating costs.
With Coforge's Card Dispute Center of Excellence, it is easier to achieve quicker dispute settlement and a greater win rate. This center of excellence incorporates an omnichannel contact center that is AI-enabled, thus helping raise customer satisfaction levels while cutting expenses.
Merchant acquirers, issuers, and chargeback management companies have been achieving the following results:
60% reduction in turn time
45% cost reductions
An ability to manage a 25% to 30% increase in volume with no effect on performance levels