Visa Faces Soaring Credit Card Disputes Despite Anti-Fraud Efforts Amid E-commerce Boom

Despite the proliferation of prevention software, Visa has reported a persistent increase in credit card disputes, with over 90 million disputes in 2022. The surge is attributed to the growth of e-commerce, inflation, and the convenience of dispute filing for consumers.

11 September 2023 – Visa Inc has seen a continued surge in credit card disputes, defying efforts to curb them through prevention software, as fraud escalates alongside the growth of e-commerce and inflation. Data provided by the payment giant revealed that disputes on Visa’s network exceeded 90 million in 2022, a significant uptick from the 70 million disputes filed in 2019, before surging by 24% in 2020 during the pandemic and maintaining a 2% annual rise in 2021 and 2022.

Despite their ease of filing for consumers, disputes remain a somewhat opaque aspect of the payments industry. Both Mastercard Inc and American Express Co declined to disclose their disputes data. In 2019, Visa and Mastercard each acquired dispute prevention companies, Verifi Inc and Ethoca Ltd, respectively, and have been actively promoting their services at industry conferences.

Disputes can pose significant costs and administrative burdens for both credit card companies and merchants. Chargebacks, which result from disputes and lead to refunds, are particularly costly, amounting to approximately US$2.40 (RM11.23) for every dollar disputed, according to Visa’s Verifi, or even as high as US$3.36 (RM15.71) for every dollar, according to Mastercard’s Ethoca.

A survey conducted by Justt Ltd, a startup specializing in automated dispute processing, revealed that over three-quarters of consumers in the UK and US filed a dispute in the past year. However, there remains no clear consensus on who bears the financial burden.

The sustained increase in disputes is largely attributed to the ongoing shift towards online shopping since the onset of the Covid-19 pandemic, with rising inflation also playing a minor role. Some retailers, including industry giants like Walmart Inc, now recommend that customers utilize the credit card dispute system to resolve refund disputes instead of handling them in-house. Google searches for “credit card dispute” have surged since 2019.

Companies dedicated to combating credit card fraud, such as Riskified Ltd, are poised to benefit from this trend. The Tel Aviv-based firm collaborates with renowned brands such as Prada SpA, GoPro Inc, and Peloton Interactive Inc, and is projected to witness a revenue increase of approximately 15% this year. Venture capital has also taken notice, with Justt securing US$70 million (RM327.21 million) in multiple funding rounds in 2021. – reference: Bloomberg

Author: Terry KS

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