Merchant Descriptors

Table of Contents

1. What Is a Merchant Descriptor?
2. How Can Bad Merchant Descriptors Cause Chargebacks?
3. What Makes a Good Merchant Descriptor?

There are a lot of different reasons why a merchant might be receiving chargebacks, and it's important for merchants to investigate and understand the reasons behind their chargebacks in order to take the steps need to fix them. Oftentimes this is a complicated process, but in some cases it can be relatively simple.

A bad merchant descriptor or billing descriptor is one of the most common causes of chargebacks. Fortunately, it's also one of the easiest to fix. How do bad descriptors cause chargebacks, and what do merchants need to know in order to make sure their descriptor is a good one?

Many cardholders use their bank or credit card statements—both the online ones, which are updated in real time, and the ones that are sent to them at the end of each month—to make sure that nothing untoward is going on with their credit and debit cards. When fraud occurs, cardholders usually only find out about it when they read their statement and spot a transaction they don't recognize.

The problem is that when merchant descriptors are cryptic or unclear, even legitimate charges can appear unfamiliar and seem fraudulent. When cardholders dispute legitimate charges, this leads to “friendly fraud” chargebacks. Friendly fraud can be done intentionally; this practice is sometimes called cyber-shoplifting.

Many instances of friendly fraud, however, are carried out by cardholders who genuinely fail to recognize charges and call their banks to report them as fraudulent. While friendly fraud can happen for a wide range of reasons, confusing merchant descriptors are one of the most common causes.

Merchant descriptors are typically set up when a merchant first enrolls with their payment processor, and new merchants who are eager to get started making sales and processing cards aren’t always thinking about how this information will look to cardholders.

There are three different types of merchant descriptors:

• Pending descriptors, also known as soft descriptors, are the descriptors that appear next to pending charges that have been authorized but are still awaiting settlement. Sometimes these will look virtually identical to the static descriptors, but some payment processors will use their own name and contact information in pending descriptors rather than the merchant’s.
• Static descriptors replace pending descriptors once transactions are settled. These are the permanent descriptors that get printed on month-end statements.
• Dynamic descriptors are an option offered by some payment processors. They allow the merchant to substitute different descriptor information depending on the product, service, or location involved in the transaction. Some processors give merchants the ability to replace both pending and static descriptors with dynamic ones, others only allow the replacement of pending descriptors.

A typical merchant descriptor consists of about 20-30 characters and includes the merchant’s name as well as location and/or contact information such as their phone number, URL, city, state, zip code, or country.

Some issuers will display additional information about the merchant alongside their billing descriptor when cardholders look up their statements in their online banking portal. This is highly useful for helping cardholders identify their charges, but it is done at the issuer’s discretion and is not under the merchant’s control.

This situation often arises when a merchant sets up an account with a payment processor under the company name they’re using at the time, but never updates the descriptor with the store name they’re now doing business as.

For example, a cardholder who buys a bouquet at “Downtown Flowers” might become very confused weeks later when they see a charge from “CITYBLOOMZ LLC” on their statement.

Similarly, some companies operate multiple businesses with different names under the same corporation. If the descriptor uses the corporate name rather than the name of the store the customer purchased from, many customers won't recognize it.

While cardholders can usually sort these issues out by calling the phone number in the descriptor, some may be hesitant to call a number that they believe to be associated with a possible fraudster. If the cardholder insists to their bank that they don’t have any recollection of making the charge, the merchant may end up with a friendly fraud chargeback.

The single most important thing a merchant can do to reduce friendly fraud from merchant descriptor confusion is to make sure that the merchant name in the descriptor matches the name of the store that customers will be familiar with.

If you haven’t checked or updated your descriptor in a while, look it up and think objectively about whether or not it provides enough recognizable information to cardholders.

Merchants should look into using dynamic descriptors if their payment processor offers that option. These can provide additional information to help customers remember purchases they may have forgotten. They can also help prevent issues caused by confusion between multiple authorized users on the account. Dynamic descriptors can be especially helpful for merchants who have multiple brands under the same merchant account.

Including a phone number is always a good idea, and it helps to make sure there's someone on the other end of that number as often as possible.

If a confused customer calls the number on the descriptor and is met with no response or a half-hour hold time, they're likely to give up and dispute the charge instead.

If you have the space, including your URL provides another easy way for cardholders to look you up and jog their memory. It may even be worth investing in a shortened form of your domain name for this purpose.

Remember that not every issuer will display your merchant descriptor in exactly the same way. To identify potential problems, try making some test transactions with multiple issuers to see how your descriptor looks with each of them.

Friendly fraud chargebacks can be hard to prevent. They originate from ordinary transactions made by legitimate customers, so oftentimes the only thing you can do is fight them with compelling evidence after the fact.

The ones that result from unclear merchant descriptors are the exception to this rule. If you follow the best practices for merchant descriptors, you can eliminate a great deal of the confusion that leads to friendly fraud chargebacks.

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