How 5G and Connected Commerce are Reshaping Disputes and Chargebacks
As networks become lightning fast thanks to the rollout of 5G technology—the type and number of personal devices and items connected through the Internet of Things (IOT) is growing. As it changes how and where we shop—it’s affecting payment disputes and chargebacks.
The performance of these super-fast wireless networks is transformative, as people are no longer limited to making online purchases from, say, their laptop at home or the office. They can now make purchases both large and small from anywhere and on any device. You can easily buy and stream a movie from the car or the train. Also, it powers a more connected instore customer experience with shoppers being able to use their phone to easily check an item’s availability, find the right aisle and checkout using contactless biometrics payment technology.
With IoT Analytics predicting 27 billion connected devices globally by 2025, roughly double the number in 2022, it’s changing the nature of transaction disputes and chargebacks.
What Merchants Need to Know
As connected commerce goes mainstream, here are two initial considerations merchants should be aware of:
Consideration #1: Consumers are increasingly making disputes for more than fraud.
In the past, the dispute and chargeback process was mostly used to address unauthorised transactions due to suspected fraud. But recent research found cardholders are increasingly using it to resolve service-related issues they encounter with the merchant.
A recent study by Ethoca and PYMNTS.com found that 71% of consumers surveyed who disputed charges in the 12 months prior had done so because of a service error, such as the item arriving late or damaged or being delivered to the wrong address. Previously, such service issues would typically have been addressed by the customer contacting the merchant directly and trying to resolve the problem—but today consumers are increasingly using disputes as the go-to for handling service issues. These types of service-related disputes are still often coded as fraud.
People are also using disputes as the go-to tool when engaging in friendly fraud—disputes made when the cardholder doesn’t recall or recognise a legitimate transaction on their transaction statement (“transaction confusion”). Sometimes such disputes happen because another household member made the unrecognised transaction using the card information being stored on an online account, such as a shared TV streaming subscription (also known as “household fraud”).
Whether a dispute happens due to fraud or a service-related dispute, merchants face the same outcome: a chargeback.
Consideration #2: Connected commerce could unleash more disputes.
As people use more types of connected devices to make purchases, merchants need to be ready to address the potential flood of disputes that connected ecommerce could unleash.
For one, merchants should make it easy for customers with service-related issues to contact them directly to resolve their problem. Disputes should not be looked at as an easy, go-to “fix” for consumers to address every service issue they experience—especially when there’s no fraud involved. Merchants should consider putting their contact information in issuers’ mobile banking apps to encourage customers to contact them first whether they experience a service issue or have “buyer’s remorse” and want to make a return or exchange.
Merchants should also consider investing in tools that can help them prevent disputes from becoming chargebacks and reduce the odds that transaction confusion and household fraud leading to unnecessary chargebacks.
Harnessing the Future
The future of shopping is here, and merchants need to embrace the technologies that can help them engage with customers wherever they happen to be and through whatever they channel or device they prefer.
Merchants that are proactive about preventing disputes and chargebacks will be best positioned to realise revenue growth while protecting their bottom line.