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Credit card disputes keep rising at Visa as e-commerce booms

Credit card disputes at Visa continued rising past their pandemic boom despite the proliferation of prevention software, as fraud grows alongside e-commerce and inflation.

Disputes on Visa’s network rose to more than 90 million in 2022, data provided by the payment company showed. More than 70 million disputes were filed in 2019, Visa said, before rising 24 per cent in 2020 during the pandemic and about 2 per cent a year in 2021 and 2022.

Disputes, despite being easy for consumers to file – making it one of the most-common credit card frauds – are an opaque part of the payments industry. Both Mastercard and American Express declined to provide disputes data.

Visa and Mastercard both bought dispute prevention companies in 2019 – Verifi and Ethoca, respectively –and regularly promote their offerings at conferences.

Disputes can be costly and onerous for both credit card companies and merchants to process. Chargebacks, when a dispute results in a refund, cost merchants dearly – about US$2.40 (S$3.30) for every dollar disputed, according to Visa’s Verifi, or as high as US$3.36 for every dollar, according to Mastercard’s Ethoca.

A survey by Justt, a start-up that automates dispute processing, found more than three-quarters of consumers in the UK and US filed a dispute in the past year, but there was no clear consensus on who foots the bill. 

The increase in disputes is widely attributed to the ongoing shift to online shopping since the Covid-19 outbreak, and to a lesser extent to rising inflation. Some retailers, including giants like Walmart, even advise customers to use the credit card dispute system to settle refund disagreements, rather than handling disputes in-house. Google searches for “credit card dispute” have risen since 2019.

Listed companies trying to stamp out credit card fraud, like Riskified, stand to benefit. The Tel Aviv-based company works with brands like Prada, GoPro and Peloton Interactive, and is expected to increase revenue by about 15 per cent this year. Venture capital has also taken note – Justt raised US$70 million in several rounds in 2021. BLOOMBERG

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