Quick Dispute Resolution Leads to a More Efficient Digital Commerce Ecosystem, Verifi CEO Explains

Within any commerce ecosystem — particularly in digital commerce — chargebacks appear to have become a way of everyday life, according to an update from Verifi.

For merchants, chargebacks can be a drain on both time and financial resources. Improved communication between merchants and issuers is required, Verifi CEO Matthew Katz recommends. He explains that this approach helps with addressing disputes early, while preventing potential chargebacks and enhances the customer experience.

As noted in the update, Verifi’s parent firm, Visa, is anticipating a two-thirds or 66% rise in virtual payments by 2025, led by card-not-present (CNP) transfers. This is according to a Juniper Research study, titled, “eCommerce Payments Deep Dive Data & Forecasting 2020-2025.” To address these developments, Verifi has been working on its Rapid Dispute Resolution (RDR) decision engine in order to effectively automate dispute resolution.

Katz pointed out (during an interview with PYMNTS) that the ongoing expansion has been “underpinned by the mandate announced by Visa this year that all issuers and issuer processors participate in the RDR service.”

At present, 83% of the payment network’s North American issuers “are participating.” Katz also noted that he now “expects this figure to ramp up to 100% in North America this month.” He added that the total global coverage in all markets “currently sits at 71% for Visa issuers.” Issuers and acquirers now have improved visibility to offer appropriate tracking and reporting before disputes actually begin, the firm revealed

In the pre-dispute process, a customer is able to contact the card issuer — and the issue can be “resolved with a refund from the merchant.” As noted in a blog post by Verifi, RDR facilitates this early signal from customers via the issuer’s interaction with Visa Resolve Online (VROL) to the merchant “to resolve inquiries before they escalate — saving all parties money and time.”

Katz added that the ecosystem “benefits from a quicker resolution using fewer resources.” When a dispute cannot be resolved via RDR, the transaction will “proceed to the full dispute process.”

Katz also noted that arriving to this point has been “a bit of a process.”

He added that “obviously, with a new solution, in a network that includes issuers, acquirers and merchants, there are several moving pieces at the same time.”

The update also revealed:

“Getting 100% buy-in required every stakeholder to adopt a new mindset, he said, as embracing the pre-dispute process changes how much acquirers can bill merchants for the disputes (in terms of chargeback fees) and how merchants interact with customers. … FIS and Fiserv as two examples of larger companies that have become “incredibly supportive” of RDR, as they’ve adjusted their own systems to ensure that merchants are no longer charged chargeback fees for RDR cases.”

The update further noted:

“There’s a positive ripple effect for the merchants too. Previously, they wouldn’t have challenged the disputes, choosing to pay incremental fees rather than dealing with any hassles. The pre-dispute process … reduces a significant portion of that unnecessary burden on the merchants and platforms that otherwise would have existed as a chargeback.”

For other merchants, resolving the disputes quickly — as in, simply agreeing to credit the amount in contention — “is a way to avoid damaging their brands.”

However, with the richer data on hand, tied to the pre-dispute process, and with the improved dialogue between merchant, issuer and consumer, Katz noted that RDR enables “an opportunity for the merchant, for any variety of reasons, to improve the business, improve their margins — and ultimately create a better ‘brand experience’ with their customers.”

The update also mentioned that it enables merchants “to sidestep the confusion surrounding provisional credits, which are essentially short-term credits that are issued from a financial institution (FI) into a merchant’s bank account (and extended to the consumer) while the dispute winds on.”

Merchants also have “a degree of autonomy in the process,” according to Katz. They are able to establish rules for who gets refunds and who doesn’t — “fine-tuning that can only be done across the card rails and network-of-network effect that Visa has been building out for several years.”

Katz added that merchants have “the ability to configure multiple sets of rules to really ensure that they’re doing the best thing for their business.”

Beyond addressing client inquiries, data obtained from RDR provide key insights into how well products and services are performing, Katz noted. He added that “a rash of returns on shirts, for example, might uncover that a particular suppliers’ buttons are sub-par and don’t close properly.”

There are also certain advantages that accrue to recurring subscription companies, stated Katz. He gave the example of where there “might be confusion over how many months a customer has been charged for a service.”

Katz further noted that “even if you called the merchant and they refunded the fifth month’s transaction, let’s say, most issuer systems don’t match the refund or the credit to the correct transaction.” He added that “there’s still a very significant risk that things are not reflected correctly, and then you call the bank to charge it back, and it flows through the ecosystem.”

RDR may allow issuers re-examine how they score authorizations — and chargebacks are “a big component of this.” He pointed out that if a merchant account is receiving chargebacks disproportionate to the sales volume of the issuers’ ecosystem, the issuer can “tune down” authorization “with the aid of neural networks and artificial intelligence (AI).”

He added:

“We want to be able to associate an increased authorization rate with a reduction in disputes because of RDR (and of course, cardholders themselves want higher authorization rates. Even if you can increase the authorization rate by five basis points, it’s significant).”

The firm concluded:

Verifi will seek to roll out new feature functionality in 2022, in particular an application programming interface (API) that lets clients customize their own rules-based decisioning engines. Elsewhere, the firm will focus its efforts beyond North America and parts of Europe to include a truly global expansion. Ideally, a third of disputes could be solved through RDR.”

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