Chargebacks stemming from confusing billing descriptors are costing UK merchants more than £128million each year according to new research from Chargebacks911, the global chargeback technology firm.
The leading reason for customers to dispute a transaction with a merchant is that said transaction is unrecognised. As a result, merchants are having resources drained looking to solve these issues which in turn impacts their bottom line. Exploring transaction disputes in further detail, Chargebacks911 published its 2024 Cardholder Dispute Index.
In it, Chargebacks911 examined more than 4,000 consumers and found that 58 per cent of cardholders admit to sometimes finding card statement purchase descriptions confusing. Of that number, nearly a third reported this happens ‘somewhat often’ or ‘very often’, and is the reason customers dispute a charge 27 per cent of the time.
Make life simple and clear online
As shopping habits have shifted increasingly online and away from familiar high-street brands, the potential for transaction confusion has grown exponentially. While digital commerce gives consumers more retailers and products to choose from, lack of familiarity with some brands, as well as parent companies doing business as a myriad of other names, creates complex transaction records that many consumers find difficult to track.
Confusion around billing descriptions makes it that much harder for customers to recognise valid descriptions and by mistaking them for fraud, it can lead to unwarranted disputes and chargebacks for merchants, costing them money, resources and reputational damage, if not addressed.
Monica Eaton, CEO of Chargebacks911
“I don’t think there has been a more seismic shift in the way we shop than there has been over the last decade,” said Monica Eaton, founder and CEO of Chargebacks911. “If merchants are not strategising with the card networks and their merchant account rep to produce clear billing descriptors, then they risk financial and reputational damage as consumers more often than not will contact their banks to dispute the charges.
“One driving factor behind the rise in transaction confusion is the diversification of shopping platforms and methods. Consumers now have access to a plethora of online stores, subscription services, and digital wallets, each presenting transactions differently on statements. This variety, while beneficial for consumer choice and convenience, creates a fertile ground for misunderstandings.
“A purchase made on a third-party marketplace, for example, might appear under a different name on a bank statement, leading the consumer to question its legitimacy.”
Friendly fraud on the rise
The nature of these disputes often falls under what is known as ‘friendly fraud‘. This term refers to instances where consumers dispute legitimate charges, sometimes intentionally. According to Javelin Strategy & Research, friendly fraud accounts for a staggering 60 per cent to 80 per cent of all chargebacks. The impact on businesses is profound, not only in terms of financial loss but also the administrative burden of managing these disputes and optimising policies and procedures so it doesn’t happen again.
Moreover, the global expansion of e-commerce exacerbates the problem. A study by Flyers-on-line.com projects that global e-commerce revenue will grow by 64.69 per cent from 2023 to 2027, reaching an astonishing $6.34trillion.
As markets like China — which alone is expected to see its e-commerce market value more than double by 2027 — continue to dominate, the complexity of cross-border transactions and diverse payment systems will only increase. This is projected to reach approximately $1.73trillion by 2027 with a compound annual growth rate (CAGR) of 17.3 per cent. For consumers, this means more unfamiliar transaction entries on their financial statements.
Updating billing descriptions
When a consumer sees an unrecognised charge on their account, their first instinct is usually to call the number on their card. Although a logical step, it doesn’t mean that the unrecognised transaction automatically indicates fraud. The cardholder is still required to contact the business before calling the bank. This gives the merchant an opportunity to fix the problem, which often resolves issues without involving the bank at all.
However, the findings show that the most common reason for contesting a transaction with the issuer was finding an unrecognised charge on their account. Yet, more than a quarter of merchants don’t know how their billing descriptor appears on statements, and nearly half claim they have never modified their descriptor to more clearly represent their organisation.
According to Eaton, merchants can review and change their billing descriptor by reaching out to their merchant service provider.
While updating billing descriptions can significantly ease chargebacks stemming from unrecognised transactions, Eaton maintains that merchants still need a proactive and responsive chargeback management strategy for consumers who will still instinctively call their bank for purchases they’ve forgotten about.
“While there are companies that offer ways for merchants to prevent transaction confusion, the problem persists because unfortunately, people still forget purchases, even when given the information that should help them,” said Eaton. “This is where we come in to help merchants with all aspects of chargebacks management, from prevention through to representment.”
The stakes are high, and businesses that fail to address transaction confusion risk not only financial loss from chargebacks but also potential damage to their reputation and customer relationships. With friendly fraud representing a significant portion of chargebacks, Eaton says the onus is on merchants to implement robust measures to mitigate this risk.
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