Merchants are losing revenue from disputed payments


We could call controversial card transactions the equal opportunity challenge for merchants large and small.

And there’s a disconnect between the idea that using homegrown solutions to these disputes is more effective than using a vendor, and reality.

To that end, the report Dispute-Prevention Solutions: The Bottom-Line Benefits Of Third-Party Solutions, a collaboration between PYMNTS and Verifi, found that merchants with annual sales of more than $1 billion lose an average of 0.51% of their sales to disputed transactions. The problem also affects merchants with the relatively lowest sales, at 0.4% of those with sales of $20 million to $100 million.

And 23% of retailers say they systematically under-detect fraudulent disputes over intentional purchases – giving a sense of how serious the problem can be.

And things are getting worse: 24 percent of merchants with annual sales of more than $1 billion saw a spike in lost revenue from disputed transactions over the past year. one-third saw the number of disputed transactions increase.

Among the smallest merchants, 12% reported an increase in lost sales due to disputed transactions in the last year compared to the previous year, while 26% saw an increase in the number of disputed transactions.

This underscores the value of using dispute resolution tools – either proprietary or in-house. Data shows that 34% of merchants with annual sales greater than $1 billion use third-party tools. In comparison, 93% of merchants with annual sales between $20 million and $100 million use third-party solutions.

There is some correlation between using third-party tools as a more effective line of defense in disputes than in-house solutions. Merchants who do not use third-party tools have 0.61% of their transactions disputed, a rate significantly higher than the 0.39% of disputed transactions for merchants who rely solely on third-party tools. Additionally, 45% of companies that use their own systems say these tools are very or very effective – despite the fact that third-party tools perform better.

In fact, 83% of merchants rely solely on third-party tools to manage cardholder disputes to limit revenue loss to 0.1% to 0.5% of annual revenue. That’s far better than average, suggesting that some of the conventional wisdom needs to be reset.

Get the report: Conflict Prevention Solutions: The Key Benefits of Third-Party Solutions


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