Consumer Clarity
In the realm of chargebacks, prevention is the best medicine. While fighting chargebacks through representment will always be a crucial part of an effective chargeback management strategy, any chargeback you can prevent saves you the cost of a chargeback fee, the impact on your chargeback ratio, and sometimes the loss of revenue as well.
Mastercard Consumer Clarity is an effective tool for preventing certain types of chargebacks by providing transaction details in real time to the issuing bank. While it’s far from 100% effective, it can be a potent addition to a merchant’s chargeback management arsenal, helping to reduce risk and prevent revenue loss.
Friendly Fraud and Unrecognized Charges
Friendly fraud, also referred to as first-party misuse, occurs when a cardholder disputes a valid transaction with their issuing bank. In some cases, the cardholder is attempting to get something for nothing by intentionally making a false dispute. In others, they may mistakenly believe that the transaction is fraudulent.
The issue of friendly fraud often begins with cardholders discovering charges on their bank statements that they don't immediately recognize.
This discovery may be due to a lack of transaction details, unclear merchant descriptors, or simply a lapse in memory. When cardholders are unsure about the origin of a charge, their first instinct might be to contact their issuing bank to dispute it, unintentionally initiating the friendly fraud process.
Several factors contribute to the common occurrence of customers disputing valid transactions. These include:
- Lack of Clarity: Unclear merchant descriptors on bank statements can leave cardholders puzzled about the source of a transaction.
- Memory Lapses: Customers may genuinely forget about making a purchase, leading them to believe a charge is unauthorized.
- Fraud Fears: In an era of heightened concern about data breaches and unauthorized charges, cardholders might dispute a charge as a precautionary measure.
- Family Members or Authorized Users: Sometimes, other individuals who have access to the account might make a purchase, causing confusion for the primary cardholder.
When a cardholder disputes a valid transaction, it sets in motion a sequence of events that can have significant repercussions for merchants.
Chargebacks not only lead to revenue losses, but they also incur additional fees and operational burdens. High chargeback rates can even result in a merchant's account being flagged or terminated by payment processors.
Mastercard Consumer Clarity addresses these issues by providing a proactive solution for merchants to resolve disputes and prevent them from escalating into costly chargebacks.
What is Mastercard Consumer Clarity?
Previously known as Ethoca Eliminator, Consumer Clarity gives merchants a way to intervene in cardholder disputes in real time. It operates as a bridge between merchants and issuing banks, facilitating secure and direct communication. Its primary aim is to address a common root cause of friendly fraud: unrecognized transactions.
By providing a mechanism for cardholders to easily identify and confirm the source of a transaction, Consumer Clarity helps prevent chargebacks stemming from misunderstandings.
When a cardholder contacts an enrolled issuing bank to dispute a charge, the customer service representative can use Consumer Clarity to request additional information from the merchant. If the merchant is also enrolled in Consumer Clarity, the information will be automatically sent to the issuer.
Consumer Clarity equips issuer customer service representatives with comprehensive transaction details. This empowers these representatives to efficiently assist cardholders in identifying and understanding the charges in question. The result is a more informed and collaborative approach to resolving disputes, significantly reducing the likelihood of those disputes escalating into chargebacks.
The information provided through Consumer Clarity can include:
- Merchant name
- Contact phone number
- Website address
- Purchase receipt
- Purchase location
- Delivery status
- Tracking number
In addition to conveying this information to customer service representatives, some issuers may support displaying the information directly to cardholders when a charge is disputed through their banking app or website.
Consumer Clarity is similar to Visa's Order Insight, another tool designed to tackle friendly fraud. Both solutions focus on communicating order information to issuing banks in real time to prevent chargebacks, primarily those resulting from unrecognized transactions.
Deterring Intentional Friendly Fraud
Consumer Clarity can also serve as a deterrent to intentional friendly fraud. In some cases, the issuer’s customer service representative will be able to see that the cardholder’s claims are proven false by the transaction information provided, leading them to reject the cardholder’s dispute.
In other cases, the cardholder may stop pursuing an illegitimate dispute when it becomes clear that the bank has access to detailed purchase information that might reveal their dishonesty.
When cardholders know that merchants can provide clear evidence of the validity of the transaction, they are less likely to proceed with fraudulent disputes. Preventing intentional friendly fraud is not only beneficial for merchants in terms of preserving revenue and customer trust, but also contributes to a more secure and ethical e-commerce ecosystem as a whole.
Comprehensive Chargeback Management
Chargebacks can have a profound impact on merchants. To effectively combat this issue, a multi-front approach is essential. This approach should include:
- Prevention: Recognizing and addressing the root causes of chargebacks, as well as using prevention tools like Consumer Clarity, Order Insight, or chargeback alerts.
- Representment: Providing evidence to combat illegitimate chargebacks and recover lost revenue.
- Analysis and Improvement: Utilizing data analytics to identify patterns and trends in dispute activity, uncovering hidden root causes and improving win rates in representment.
Every merchant faces unique challenges when it comes to chargebacks. It's vital to tailor solutions to address specific vulnerabilities. By understanding the specific causes and patterns of chargebacks in their business, merchants can ultimately reduce chargebacks and preserve their revenue and reputation.
Mastercard Consumer Clarity can be an invaluable asset for merchants, offering cost-effective chargeback prevention while maintaining customer relationships. By embracing this tool as part of a comprehensive approach to combating friendly fraud, businesses can look forward to a more secure and prosperous future in the world of payments.
