Learn about the operational challenges and risks associated with the fraud & dispute process for banks and explore strategies and best practices benefitting both banks and their cardholders.

Fraud & Disputes

In an era where cashless transactions are the new norm, card payments have firmly established themselves as a preferred method. Still, the possibility of disputes remains. What are the most common dispute scenarios with merchants, and to what extent are customers protected compared to other payment methods, such as A2A?

Understanding cardholder protection levels requires a deeper dive into the frequent scenarios that lead to consumer disputes – and 

Cardholders often find themselves in situations where the ordered merchandise or services were not received, leading to the Merchandise/Services Not Received claim. In some cases, the order is cancelled due to an unmet delivery date or the merchandise being unavailable for pick-up. Another frequent grievance is the Cancelled Recurring scenario, where, much to the cardholder's dismay, a recurring transaction is processed even after its cancellation or post the account's closure.

Disputes also arise when the received product or service fails to match its description or is deemed defective, known as Not as Described or Defective Merchandise/Services. The booming e-commerce world, while offering variety, has unfortunately also seen a rise in counterfeit goods, culminating in the Counterfeit Merchandise claim.

A scenario that hinges on the nuances of the transaction, Misrepresentation, involves cases where the terms of sale were misreported. Adding to the list is the ever-frustrating Credit not Processed situation, in which the cardholder awaits a credit that never reflects, and the similar Cancelled Merchandise/Services, where credit remains unprocessed after a product return or service cancellation. In some instances, the Original Credit Transaction Not Accepted issue emerges, where the original credit is downright rejected.

The appeal of cards as a payment medium isn't just convenience – it's the consumer protection they provide. Organisations like 

 have established solid policies to shield cardholder rights and ensure merchants meet their commitments. 

The Chargeback process is a testament to this protective framework, outlined on 

. In a dispute, cardholders can approach their bank, prompting an investigation. A validated claim results in the bank retrieving the disputed transaction amount from the merchant’s bank, ensuring cardholders are not left out of pocket.

A2A transfers, while direct and prompt, do not possess the structured dispute resolution procedures established in card payments. While banks do offer protection against erroneous or fraudulent transfers, this shield often doesn't extend to merchant disputes. This makes card payments a more reassuring choice for consumers concerned about transactional disputes – which is why establishing a similar structured dispute process for A2A payments is essential in order to build the same level of trust customers have in card payments.

In summary, while disputes are a source of concern for many consumers, the payment method they choose can greatly influence the resolution. Card payments, supported by the rigorous policies of international brands like Visa and Mastercard, offer a comforting assurance. With clear processes addressing a broad spectrum of dispute scenarios, cardholders can shop with the confidence of knowing their interests are protected. For card issuers, emphasising this unique selling point can not only build trust but also drive transaction volumes. By promoting their cardholder-friendly processes, issuers can claim top-of-wallet positions, ensuring their cards are the preferred choice for consumers.

Merchant Disputes Unveiled: How Card Protections Measure Up Against A2A Payments

We are frequently invited as guest speakers on topics related to payments. Here you will find our latest appearances.

Podcasts

Our co-founders Fatemeh Nikayin, PhD and Thomas Müller recently joined EM360tech for an insightful podcast discussion with Matt Harris on the increasing rates of fraud and disputes and how financial institutions can improve their use of technology to minimise the risk. Gain fresh perspectives about common pain points for CEOs and COOs and how issuing banks should be leveraging technology for fraud recovery.

🎧 Reinventing Fraud Recovery and Disputes

As we dive deeper into 2023, the landscape of cardholder disputes continues to evolve, presenting both challenges and opportunities for issuing banks. According to the latest 

, the current environment demands a proactive approach to mitigate the impact of increasing chargebacks and changing cardholder behaviour. Let's take a closer look at the facts from an Issuing bank’s perspective:

As we dive deeper into 2023, the landscape of cardholder disputes continues to evolve, presenting both challenges and opportunities for issuing banks. According to the latest Chargeback Field Report, the current environment demands a proactive approach to mitigate the impact of increasing chargebacks and changing cardholder behaviour. Let's take a closer look at the facts from an Issuing bank’s perspective:

The Current State of Chargebacks for Issuers

News

As the only fully digital dispute management SaaS solution, Amiko empowers customers with seamless dispute capabilities. By launching the Amiko Virtual Agent, Cembra enables customers to dispute transactions directly from their banking app.

Cembra Announces Launch Of Amiko

The Converge podcast hosted our CEO Thomas Müller where he delved into the EPI's plans to establish a new European payment network. Discover among many topics the changes in the EPI’s vision and the need to establish robust consumer protection policies as it expands across Europe.

🎧 The European Payments Initiative (EPI): Bridging instant payments across the bloc

Learn about the operational challenges and risks associated with compliance with payment networks like Visa and Mastercard and find out how to simplify this process and make it more manageable and efficient.

Scheme Compliance

One of the core aspects of card payments is to comply with license rules (

) of international payment networks (e.g. 

. Such responsibility is usually taken care of by a so-called scheme compliance manager or a team of scheme compliance experts, depending on the bank’s size.

As implied by the term, scheme compliance entails a critical responsibility: to avoid non-compliance leading to interoperability issues, non-compliance assessments, and financial losses due to not optimal interchange or scheme fees. In extreme cases, overlooking compliance requirements can cause fines and lead to a loss of the scheme licence for a bank.

Scheme Compliance Process and Related Problems as of Today

Despite the importance of the process, today’s approach is often inefficient, time-consuming and important requirements are easily overlooked.

There is vast potential to improve this process in the digitalisation age and gain control over the scheme compliance with minimal efforts. At Rivero, we have done this with our product, kajo, and now enable our customers to do it differently.

5f87af66-5a8a-46b2-b3ec-0a65c0f85b2f_1456x1048.png

6 Improvements for a New Approach to Card Scheme Compliance

In this section, you can read featured success stories from banks that have leveraged our products.

Success Stories

Viseca’s goal is to provide best in class services for partner banks.

One of the essential services that Viseca is offering to its partner banks is back-office operations, from customer service to fraud and chargeback handling. What is critical for Viseca is to bring efficiency and excellence to these operational processes to provide best in class services to their partner banks.

Fraud and chargeback handling is becoming more and more challenging.

Fraud and chargebacks handling are among the core back-office operations, often neglected when it comes to innovation. Chargeback is one of the fundamental payment processes established by payment networks like Mastercard, Visa, and Amex to protect cardholders in cases of fraud or when there is a problem with the merchant fulfilment of the cardholder’s purchase.

It is becoming more and more difficult for issuers to process an increasing volume of chargebacks driven by the launch of e-commerce capable modern debit cards (Debit Mastercard, Visa Debit) and the overall increase in e-commerce transactions.

According to Nicolas Glück, Senior Risk Specialist at Viseca Payment Services SA, it was nearly impossible to improve the chargeback process with their previous application. He added, “the application was not being further developed and optimized according to our needs, which is no longer in line with today’s requirements in the digital age”.

Modern SaaS solutions help to bring continuous improvements to the chargeback process.

“When looking for a replacement for our existing application, what made us decide for amiko and Rivero as a partner was the trustworthy, creative and engaging relationship that we experienced with Rivero early on. We were actively involved in prioritising functionalities and features that add the most efficiency to our process. The Rivero team was very supportive and flexible to take our needs and priorities into consideration and involve us in such discussions from day one,” Nicolas Glück said.

“Two main factors tipped us in favour of amiko. Firstly, amiko, as a SaaS solution, does not require management and maintenance on our side nor does it require integration with our payment processor. Secondly, having a SaaS solution updated regularly with new features and functions without any effort on our side is completely new in the chargeback world. We realised that such a SaaS solution not only reduces efforts on our side but also removes the need for typical lengthy and costly change requests that we were used to”. Patrick Dessouslavy, Head Operations Risk Management at Viseca Payment Services SA

From an integration point of view, Thomas Herzog, Senior Program and Project Manager at Viseca Payment Services SA, said: “It was the easiest project I have had so far, which is not very typical in our domain. The Rivero team is well-informed about our business and our needs; the project materials and documents were well-prepared. I have never had the experience of having all documentation and information needed to start a project, and that made it very easy for us”. He added that “usually, if you are working with providers of software/SaaS solutions, the technical documentation is available but typically what you don’t have, is the business view. However, in this project, Rivero provided us early on with the business documents and information that was very helpful for us to do our part internally”.

Riccardo Botti, IT Project Manager at Viseca Payment Services SA, added that “getting amiko up and running on the IT side went very smooth and with minimal effort on our side. The solution architecture is designed in such a way that it reduces the IT effort on the issuer side. All we needed to do was to set the configuration and spin-up one server with internet connectivity in our data centre”.

For Viseca, it was important that the launch goes smoothly and the team can get up to speed with amiko quickly. According to Fabio Sulzberger, Head Fraud Operations at Viseca Payment Services SA, “the go-live went very smoothly. The Rivero team was very responsive to resolve any small issues”. Nicolas Glück added, “we had never experienced such a level of communication and responsiveness. Whenever we reported a small issue, it was fixed on the same day or at the latest the next day”. Fabio Sulzberger continues, “everyone in my team is pleased working with amiko; they found the product efficient and user friendly, and they appreciate that they can communicate their wishes for new features and functionalities. Rivero has also been diligent in collecting the team’s feedback and suggestions and putting them on the product roadmap”.

Concerning the product roadmap and future features, Nicolas Glück says that “What I appreciate is that we have an excellent overview of the product roadmap. We know what features are being developed now and what is next on the roadmap, and we can communicate our priorities to Rivero.”

We do not stop in the back-office. The next step is cardholder self-servicing!

Continuous improvement is key to Viseca. “Our partnership with Rivero just started. As a next step, we are looking forward to launching self-servicing to our customers via Viseca’s strong digital channels, “one app” and “one portal”. I am personally very much looking forward to having automation as part of the chargeback handling process. That, together with the cardholder self-servicing, will bring much-needed efficiency to the process and change the chargeback world,” said Nicolas Glück.

“amiko has opened up new doors for us by enabling us to offer digital services in further operational domains, such as handling insurance claims”. Patrick Dessouslavy, Head Operations Risk Management, Viseca Payment Services SA.

Patrick Dessouslavy continues that with Rivero, Viseca will bring more innovative solutions and best-in-class services to their partner banks and their cardholders.

Viseca’s goal is to provide best in class services for partner banks.


Discover the Effortless & Speedy Integration with a SaaS Chargeback Product — Amiko

Inefficient dispute management might be impacting issuers more than you think. Keep reading to find out how and share your thoughts with us in the comments 👇

Disputes pose significant challenges for card issuers which are important to understand in order to develop streamlined, customer-focused processes that are effective & efficient. Here are the key challenges:

: Dispute management can be an incredibly resource-intensive process for issuing banks. From investigating disputes to gathering evidence and communicating with various stakeholders, it requires significant manpower and time. The increasing volume of disputes and complexities can overwhelm existing resources, leading to delays and inefficiencies in resolving cases.

: Disputes pose a considerable financial risk for issuing banks. When a dispute arises, the bank must initiate an investigation and potentially provide provisional credit to the cardholder. This financial exposure can be significant, especially in cases of large transactions or widespread fraud. Managing and mitigating this risk is vital to protect the bank's bottom line.

: Disputes can have a detrimental impact on the cardholder experience. When a customer notices an unauthorised transaction or experiences a billing error, they expect a swift resolution. Delays, miscommunication, or a lack of transparency during the dispute process can lead to frustration, erode trust, and tarnish the bank's reputation. Ensuring a smooth and customer-centric dispute management experience is paramount.

: Effective communication with cardholders throughout the dispute management process is crucial. However, maintaining clear and timely communication can be challenging, especially when multiple parties are involved. Delays in providing updates, insufficient or confusing information, or a lack of responsiveness can exacerbate the cardholder's concerns and prolong the resolution process.

It's essential for issuing banks to adopt innovative solutions that streamline and enhance their dispute management processes. Investing in technologies to automate and streamline the process can help reduce manual efforts, improve cardholder experience, and expedite dispute resolution.

Inefficient dispute management might be impacting issuers more than you think.

Dispute Management and the Challenges Issuers are Facing

Gain exclusive insights into the evolving world of payments that are reshaping the banking sector and enhancing customer experiences.

Thought Leadership

The European Payments Initiative (EPI), in its ambition to unify Europe’s fragmented payment landscape, recently acquired iDEAL, a successful payment system entrenched in the Dutch marketplace since 2005.

As the project expands across Europe, aiming to provide a ‘unique, European-grown instant payment solution’, it faces a multitude of areas to consider — and among them, compliance and fraud dispute management are paramount.

Scheme compliance is the linchpin of any payment ecosystem, enforcing interoperability and maintaining consistent consumer experiences. It’s the underlying structure that ensures the harmonious functioning amongst all participants in the ecosystem. International payment networks, like Visa and Amex, have established scheme compliance to keep participants apprised of updates and requirements. Weekly bulletins, accessible portals, and strict deadlines are all part of their robust compliance machinery.

Scheme compliance, managing fraud and disputes

However, for the EPI, replicating such a complex operation will be challenging, requiring tremendous coordination and collaboration among various stakeholders. It will be interesting to witness how EPI creates and implements a process that keeps every participant aligned with evolving rules and protocols, thus ensuring a seamless consumer experience.

Alongside scheme compliance, managing fraud and disputes is another area that the EPI will need to consider. With e-commerce transactions on the rise, consumer protection is becoming increasingly important. Consumers need assurance that they are safeguarded against mishaps, whether it be a failed delivery, a defective product, or a cancelled service.

At present, most account-to-account payment methods lack defined rules or guidelines around consumer protection. Contrastingly, the likes of Visa and 

 have developed robust protection frameworks. As cardholders, their customers can dispute transactions, provide evidence, and potentially get reimbursed if things go awry. Such protections not only provide peace of mind to consumers but also foster the adoption of these payment methods.

The need for the EPI to adopt best practice

Will EPI emulate such best practices? It remains to be seen whether it will establish clear rules and guidelines to ensure consumer protection, regardless of the specific bank a customer is associated with. Providing a consistent, well-regulated dispute resolution process across all participating banks is crucial, giving customers the confidence they need to adopt this new payment method.

Taking iDEAL’s example, which operates as an account-to-account payment system in the Netherlands, EPI must build a common framework for all European countries. If a customer encounters an issue while using iDEAL today, the bank’s response varies depending on the case and institution. Under EPI, such ambiguity should be eliminated, creating a payment scheme that provides uniform protection and liability parameters, fostering trust among its users.

Another aspect under the umbrella of consumer protection is fraud. The increasing cases of unauthorised transactions using stolen credentials pose a significant challenge to any payment scheme. While disputes might arise from issues with purchased goods or services, fraud-related disputes are an entirely different beast, requiring careful consideration and swift resolution. Taking examples of card payments, Visa and Mastercard fully protect consumers in cases of fraud (with the so-called zero-liability policy).

Balancing act: convenience, security and consumer protection

EPI needs to have a well-articulated strategy to handle fraudulent transactions, providing clear guidelines to banks on how to manage such cases while also guaranteeing consumer protection. Striking a balance between convenience, security, and customer protection will be a delicate act, but one that is essential to EPI’s long-term success.

In conclusion, as EPI embarks on its journey, evolving from iDEAL’s existing network, it faces the significant task of creating a scheme compliance framework and consumer protection program that can rival those of established international players. It’s not just about providing a pan-European payment solution but also about ensuring a safe, secure, and reliable service for consumers across the continent. Ultimately, the success of the EPI efforts depends on consumer adoption – which will be very much influenced by seamless operations, ease of use and a sense of security.

Blog