EPA challenges dispute process to mitigate chargebacks and fraud

Through the publication of this whitepaper, the EPA (which promotes collaboration and innovation across payments) is hoping to shed light on the unprecedented rise in customers claiming ‘double credits’ through chargebacks and alternative avenues, while also providing recommendations on how to improve the customer dispute process for all stakeholders in the payments value chain.

Jane Jee, chair at Kompli-Global and Project Financial Crime leader at the EPA, said: “This whitepaper emphasises that, yet again, appropriate data sharing and collaboration are key to preventing fraudulent duplicate claims. We hope that the recommendations will be studied by the card schemes and the regulators and that action will be taken to increase efficiency and prevent fraud in this area.”

Traditionally, customer disputes and chargebacks have rarely received the focus and coverage they deserve, however one tier 1 debit and credit card issuer reported the number of non-fraud dispute cases increased by 333%.

Protections associated with card payments were scarcely fully understood outside of a small group of specialists until the Covid-19 pandemic forced holidays, flights, hotels, concerts, theatres, and entertainment events into cancellation and postponement in 2020.

On average, cases of ‘double credits’, where a customer is refunded through a chargeback claim and an alternative avenue, increased by 15% to 20% in 2020.

The surge forced issuers to bring in more resources and grow their customer dispute teams, while the Financial Ombudsman Service (FOS) has been forced to investigate over 10,000 customer disputes since March 2020.

Between January and February 2021, the EPA conducted extensive primary research through detailed stakeholder interviews on ‘double credits’.

Interviewees included over 25 subject matter experts, as well as representatives of international payment networks, card issuers of all sizes, merchant acquirers, specialist technology providers, merchants, and trade associations.

A key area of focus was investigating whether customers were receiving ‘double credits’ for disputed transactions, as well as whether there are cases of deliberate financial fraud, as criminals become increasingly aware of how to manipulate the dispute process.

The report also seeks to identify best practices and makes 10 key recommendations with a view to improving efficiencies in managing and mitigating future chargebacks.

The recommendations included: Improving communications and collaboration across all stakeholders, establishing a customer dispute working group, stronger guidelines for paying credits and increased data sharing.