# Stopping the chargebacklash
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-07-06
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Preparing for a Surge in Online Disputes - COVID-19 Impact
Meta Description: With the shift to digital commerce, merchants must be ready for a wave of chargebacks. Stay proactive to avoid escalation and maintain customer relations.
URL: https://financedigest.com/stopping-the-chargebacklashhtml

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_By **Gabe McGloin,** Head of Intl. Merchant Sales @ Verifi_

Brands have been encouraging consumers to move their shopping online for years. As a result of the COVID-19 pandemic, this has happened all at once. Even as lockdowns ease around the world, many stores and outdoor venues will remain closed or running at a reduced capacity. In the meantime, it’s easy to [predict that commerce will remain digital-first](https://www.financedigest.com/the-digital-first-world-financial-services-predictions-for-2022.html "The digital-first world: financial services predictions for 2022") – and in some cases digital-only – for some time to come.

As consumers spend record amounts on digital services and [mobile apps](https://www.financedigest.com/the-growth-of-mobile-fintech-and-the-impact-for-mobile-app-marketers.html "The growth of mobile fintech and the impact for mobile app marketers"), it’s important for merchants to be prepared for a substantial increase of payment disputes and chargebacks. Many businesses, especially smaller ones, are fighting for survival. Although they’re [supported by the Government’s Job Retention Schemes and small business](https://www.financedigest.com/where-do-small-businesses-turn-when-government-support-dries-up.html "Where do small businesses turn when government support dries up?") grants, cashflow and liquidity issues may still pose an existential threat for many.

Addressing a potential wave of chargebacks requires coordinated effort among the three main parties in the dispute: the merchant, the issuer, and the consumer. Clearer communication from merchants to consumers and more [collaboration](https://www.financedigest.com/why-open-banking-heralds-a-new-era-of-ecommerce-merchant-and-bank-collaboration.html "Why Open Banking Heralds a New Era of eCommerce Merchant and Bank Collaboration") between issuers and merchants can pre-empt chargebacks and eliminate the burden of a formal dispute process.

**Expect the unexpected**

As coronavirus has [impacted the wider economy](https://www.financedigest.com/impact-com-announces-partnerships-experience-event-ipx-bringing-together-all-players-in-the-partnership-economy-and-featuring-special-guest-trevor-noah.html "impact.com Announces Partnerships Experience Event, iPX, Bringing Together All Players in the Partnership Economy and Featuring Special Guest Trevor Noah"), plans have been changed, events cancelled, and destinations closed indefinitely. This has brought about a sudden and significant increase in disputes between merchants and consumers. Additionally, [companies also need to beware the dangers of delayed chargebacks for products and services](https://www.financedigest.com/why-financial-services-companies-should-consider-rfps-in-their-digital-transformation-strategies.html "Why financial services companies should consider RFPs in their digital transformation strategies") already sold and ‘accounted for’.

With up to 120 days to claim chargebacks on [credit card](https://www.financedigest.com/what-happens-to-credit-card-debt-when-you-die.html "What happens to credit card debt when you die") purchases, consumers are cancelling experiences and gifts purchased months ago. [Travel and hospitality have been hit heavily](https://www.bbc.co.uk/news/uk-england-52323416), as have subscription-based businesses deemed non-essential – such as gyms.

There’s also the real possibility of a second wave of chargebacks surfacing further down the line. Certain sectors, including online entertainment and gaming, [have experienced a considerable boost during the early months of lockdown](https://www.npd.com/wps/portal/npd/us/blog/2020/connections-and-community-animal-crossing-new-horizons-propels-the-us-video-game-market/), but this uptick isn’t chargeback-proof. Typically, experience shows an increase in [transactions is followed by an increase in disputes](https://www.financedigest.com/transactions-disputes-the-power-of-automation.html "Transactions, Disputes & the Power of Automation"). Even sectors [performing strongly](https://www.financedigest.com/strong-performance-of-investec-lowes-structured-product-maturities.html "Strong performance of Investec / Lowes structured product maturities") now could face a ‘chargebacklash’ a few months from now as consumers reconsider purchases made during lockdown.

The foreseeable challenge for merchants could be a lack of resources to combat the spike in disputes. The necessary personnel to manage transaction inquiries, credits, and representments may not be available due to [working from home](https://www.financedigest.com/remortgaging-a-home-to-buy-to-let-how-does-it-work.html "Remortgaging a Home to Buy-to-Let – How Does it Work?"), furlough, or layoff. You can also never be certain when the [wave will hit](https://www.financedigest.com/cash-loving-germans-fret-over-exploding-atms-as-cross-border-crime-wave-hits.html "Cash-loving Germans fret over exploding ATMs as cross-border crime wave hits"), only compounding the issue.

**A chargeback isn’t the end of the customer relationship**

Once a dispute has led to a chargeback, businesses have limited freedom of action. They must comply, completing all [processes and admin required](https://www.financedigest.com/fraud-protection-why-customer-onboarding-requires-digital-identity-processing.html "Fraud Protection: Why Customer Onboarding Requires Digital Identity Processing"). The best way to manage disputes, therefore, is to prevent them from escalating. However, this [must never be at the cost of the customer](https://www.financedigest.com/lost-in-translation-why-banks-must-learn-the-language-of-their-customers.html "Lost in Translation: Why Banks Must Learn the Language of their Customers") relationship.

To maintain positive consumer relations under these circumstances, communication is key. [Companies should proactively reach out to consumers to provide](https://www.financedigest.com/is-it-important-to-provide-media-coverage-for-your-company.html "Is it Important To Provide Media Coverage For Your Company?") alternatives to chargebacks, such as extending return deadlines and the validity of vouchers to provide consumers with other options. As always, ensure clarity in transaction receipts, terms and conditions, and all correspondence. This will [limit disputes caused by customer](https://www.financedigest.com/natwest-limits-customers-crypto-transfers-citing-scam-concerns.html "NatWest limits customers’ crypto transfers, citing scam concerns") confusion.

_![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/gabe-mcgloin-1-450x592-1736838887593-compressed.jpg)_

Regular, but not bothersome, education and explanation are also important. Consumers often don’t realise the affect their chargeback claims could have on their favourite merchants. Appealing to their goodwill and patience can help to flatten the chargeback curve.

Even after a chargeback, merchants should [continue to positively](https://www.financedigest.com/artificial-intelligence-ai-to-catalyze-the-continuous-positive-airway-pressure-cpap-devices-market.html "Artificial Intelligence (AI) to catalyze the Continuous Positive Airway Pressure (CPAP) Devices Market") engage with the consumer. It’s important that the merchant pursue the consumer’s best interests, even when they’re unhappy with a [product or service](https://www.financedigest.com/productivity-and-the-four-day-working-week-in-financial-services.html "Productivity and the four-day working week in financial services"). This includes carrying out their role in returning the funds to a customer’s account. A chargeback isn’t the end of a customer relationship and, in the current climate, merchants [need to show they care for their consumers and their business](https://www.financedigest.com/why-businesses-need-to-shift-their-e-invoicing-approach-from-local-and-tactical-to-scalable-and-strategic.html "Why businesses need to shift their e-invoicing approach – from local and tactical to scalable and strategic").

**Collaboration beats escalation**

[Remaining open](https://www.financedigest.com/eex-markets-to-remain-open-as-power-prices-soar-statement.html "EEX markets to remain open as power prices soar – statement"), transparent, and proactive with consumers will boost loyalty and help deescalate potential disputes. However, many chargeback disputes cannot be avoided or mitigated against. To ease the logistical and administrative burden, merchants need to pick their battles. It takes time to respond to disputes. Depending on the volume of disputes, [merchants must](https://www.financedigest.com/psd2-merchants-must-regain-checkout-control-through-delegated-authentication.html "PSD2: Merchants Must Regain Checkout Control Through Delegated Authentication") decide which ones are worth challenging and which ones are easier to just credit.

This can be aided by greater information-sharing between merchants and issuers. The exchange of [customer support contact information and transaction data helps merchants](https://www.financedigest.com/how-payment-institutions-can-leverage-data-to-support-merchant-customers.html "How payment institutions can leverage data to support merchant customers") decide which disputes are worth pursuing. They can then [move beyond](https://www.financedigest.com/the-high-fiber-feed-market-to-move-beyond-the-monotony.html "The High Fiber Feed Market To Move Beyond The Monotony") basic considerations like transaction sizes to more effectively deploy their resources. As a result, [businesses benefit](https://www.financedigest.com/how-choosing-the-right-mtd-for-vat-software-can-maximise-business-benefits.html "How choosing the right MTD for VAT software can maximise business benefits") from reduced investments in manual processes.

Businesses should also [provide the capability for customers](https://www.financedigest.com/verasity-joins-the-brightcove-marketplace-to-provide-customers-with-proprietary-ad-tech-technology.html "Verasity Joins the Brightcove Marketplace to Provide Customers With Proprietary Ad-Tech Technology") to track the progress of their dispute. When the consumer understands where they are in the resolution process, they are less likely to make unnecessary requests of [customer service](https://www.financedigest.com/how-can-financial-firms-improve-customer-service-after-the-pandemic.html "How Can Financial Firms Improve Customer Service after the Pandemic?"). Indeed, the more calls a consumer must make, the greater the chance they will take their [business elsewhere in the future](https://www.financedigest.com/surgical-equipment-market-high-trend-opportunities-offers-future-business-growth-by-2030.html "Surgical Equipment Market High Trend Opportunities Offers Future Business Growth by 2030").

The disruption of coronavirus is far from over, and it’s not yet clear how the [pandemic will transform the business](https://www.financedigest.com/why-seo-is-crucial-for-business-success-post-pandemic.html "Why SEO is crucial for business success post-pandemic") landscape. Yet, merchants should prepare themselves for an oncoming chargebacklash that will strain their dispute resolution processes to the limit. Fortunately, they can weather the storm by collaborating more closely with issuers, introducing consumer-first service, and applying the payment protection [systems needed to manage](https://www.financedigest.com/energy-management-system-market-to-register-a-cagr-of-14-8.html "Energy Management System Market to register a CAGR of 14.8%") disputes, while still protecting customer relationships.


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