Billing Descriptors

In the modern payments ecosystem, the nitty-gritty details of transaction processing can have a profound impact on a merchant's profitability and customer relationships. And yet even among these details, the billing descriptor gets overlooked more often than most.  

While a merchant’s billing descriptor might seem far removed from any direct connection to revenue, a bad one can have a significant effect on the bottom line. Let’s take a closer look at billing descriptors and why a good one is so important.

What is a Billing Descriptor? 

A billing descriptor is a line of text that describes a particular transaction on a customer's bank or credit card statement. It helps customers identify their purchases and provides transparency about their spending. There are a few different types of billing descriptors: 

Pending Descriptors 

When a transaction is made but still awaiting complete processing, the descriptor that temporarily appears on the customer's statement is known as a pending descriptor. It often includes the payment processor's name, a temporary code, or a shortened version of the merchant's name.  

Static Descriptors 

A static descriptor is the type of billing descriptor that first comes to mind for most people. It remains the same for all transactions from a particular merchant, typically displaying the merchant's name along with their contact details or location. 

Dynamic Descriptors 

In contrast to static descriptors, dynamic descriptors can vary for each transaction. They can include specific details such as the product name, the service used, or even the department within a business that made the sale. This level of detail helps eliminate ambiguity for customers and can be a powerful tool for merchants looking to minimize the risk of chargebacks. 

The Consequences of a Bad Billing Descriptor 

A billing descriptor that isn’t easily recognized by the customer can often lead to confusion. The customer may assume the charge is mistaken or fraudulent rather than connecting it with the purchase they made.

In the best-case scenario, this might lead to a call to the merchant’s customer service line to clarify the charge. Even that, however, if repeated too often, can hurt a merchant through increased staff hours or longer wait times for other customers seeking help. 

More obviously damaging is the possibility that the customer will dispute the charge with their bank, resulting in a chargeback for the merchant.

Chargebacks have both direct and hidden costs for merchants. They result in the loss of the transaction amount and an additional chargeback fee, which can cost anywhere from $5-$50 depending on the merchant. These fees, coupled with the administrative costs of managing chargeback disputes, can quickly accumulate and affect a merchant's profitability. 

The damage isn't limited to financial costs alone. Each chargeback tarnishes the merchant's standing with credit card companies. A high chargeback rate can lead to a merchant being labeled 'high-risk', resulting in increased processing fees or even the potential termination of the ability to accept credit card payments. 

Crafting a Good Billing Descriptor 

So, how can you, as a merchant, craft a billing descriptor that reduces customer confusion and mitigates the risk of chargebacks? Here are some strategies to consider: 

Recognizability is Key 

Ensure your business name is recognizable in the descriptor. If your legal business name and trading name differ, consider using the name that customers will know.

If your company is tied to multiple names for different regions or different aspects of the business, you’ll want to ensure that the name on the descriptor matches the name the customer will remember. 

Incorporate Contact Information 

Including contact information, such as a phone number or website URL, gives customers an immediate point of reference if they question the charge. This can divert a confused customer to your support line instead of their bank’s, giving you the chance to address the confusion and prevent a chargeback.

While a phone number is the most common form of contact info included in billing descriptors, adding a URL may have significant value. Most issuers now allow customers to dispute charges online, and if contacting the merchant seems less convenient, the customer may skip that step despite the included phone number. 

Maximize the Use of Dynamic Descriptor 

Dynamic descriptors are powerful tools for transparency. By providing specific details of the purchase, they help jog the customer's memory and alleviate potential concerns. They can be especially valuable when the transaction involves a service.

Merchants can set up dynamic descriptors for each of the basic services they offer, creating an effective reminder of what the transaction paid for.

Merchants offering a large variety of products may not be able to be specific about the item purchased, but details like the time of purchase or the store location can help jog a customer’s memory. 

Conclusion 

Billing descriptors are critical yet underappreciated aspects of payment processing. While they may seem like minor details, their potential impact on a merchant's bottom line and reputation is significant. Bad billing descriptors can lead to confusion, increased chargebacks, and damaged customer relationships. 

By investing time in creating effective billing descriptors, you can ensure that your business isn’t losing revenue to these hidden costs. Of course, not all chargebacks can be prevented so simply. If you’re dealing with a chargeback problem that a better descriptor can’t solve, consider consulting a chargeback management company for advice on further solutions that might help your business thrive. 

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