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Maintaining consumer loyalty by cracking the chargeback process

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Maintaining consumer loyalty by cracking the chargeback process 1

By Neil Smith, Regional Head of Issuer Partnerships EMEA at Verifi

Neil Smith, Regional Head of Issuer Partnerships EMEA at Verifi

Neil Smith, Regional Head of Issuer Partnerships EMEA at Verifi

In today’s dynamic retail environment, building and sustaining consumer loyalty for issuers is a top priority.

Lose consumer loyalty and there are plenty of challenger banks for consumers to go to, should they be disappointed with their current bank. While many traditional banks understand the need to adapt to changing consumer preferences and create friction-free experiences, not all do this well to secure long-term success.

To make matters worse, with consumers progressively exploring the newfound freedom to shop where they want, when they want, and how they want, they’re increasingly discovering more paths to purchasing – creating opportunities for fraudsters to move in. This presents a huge challenge for issuers, as they seek to prevent fraudulent activity across multiple devices and channels.

Fraudulent activity within retail often comes in the form of chargebacks, which have mounted to a USD $31 billion problem* for the payments industry.

What are chargebacks?

Chargebacks are essentially the reversal of an outbound transfer of funds from a consumer’s debit or credit card. They occur for various reasons, such as quality issues with products, deliveries not turning up, or confusion over the charge on a bank statement.

Usually, a chargeback is initiated when a consumer calls their card-issuing bank, rather than the merchant, to dispute a transaction. In fact, consumers are increasingly leaving merchants out of the dispute process, initiating a fraud-related chargeback directly with issuing banks up to 76% of the time*.

Understanding consumers’ pain

When consumers are confused by their card statements or question card transactions, up to 66% of the time they blame the merchant for the problem*. In the majority of transaction disputes, consumers wish to deal directly with their card-issuing bank. However, eliminating merchants from the process means consumers are at a disadvantage dealing only with issuers, who lack the necessary transaction information to determine if the dispute is legitimate. Usually, an issuer will provide a temporary refund, which can serve to alleviate the concern over lost funds and improve consumer loyalty. Additionally, consumers will contact their bank a second time for reasons which are two-fold:

  1. The consumer has forgotten what credit the bank has applied to their account and have not been informed as to which merchant the billing descriptor is related
  2. If a transaction is a monthly subscription, the issuer will refund the customer but not inform the merchant to cancel future payments

Issuers can be more effective through automating the dispute communication process, reducing the resolution time and creating efficiencies for their front line staff. Solution providers, like Verifi, can facilitate this communication method, leading to a smoother and more efficient process for consumers, merchants, and issuers.

Issuers also risk losing consumer loyalty, as they are admitting to processing a potentially fraudulent claim and only know about it due to the consumer’s declaration. In continuing with the inefficient dispute process, costs are only set to rise for merchants and issuers, which will ultimately be borne by consumers.

Although both merchants and issuers bear the risk of losing future business and damaging brand reputation following a dispute or chargeback, merchants see the bigger impact on their bottom line. Unfortunately for merchants, 63% of consumers decrease their patronage* when they have encountered a negative chargeback experience. This is significantly higher when compared with the decline in card usage experienced by issuers. 43% of consumers use their card less after a true fraud dispute and 39% for friendly fraud disputes*.

Some merchants resist arguing the chargeback and accept it as the cost of doing business, preferring instead to keep the consumer happy. On the other hand, forgive and forget might not always be best practice. Merchants generally bear significantly higher costs associated with the chargeback process. Fines, labour, lost goods, and refunds all combine to create inhibiting costs just to keep the consumer happy.

Collaboration is key to crack the chargeback process

To proactively reduce or even eliminate chargebacks, merchants need to rethink some of their existing processes. Merchants must remain vigilant against credit card fraud as part of best practices for consumer service to help ensure revenue protection and consumer retention. Additionally, innovations in the payment industry – such as solutions that facilitate better and more timely exchange of pertinent transaction or dispute data between the merchant and the issuer – can further reduce or resolve disputes more effectively, minimise the negative financial impacts of fraud and friendly fraud, and help retain more sales. Disputes only make their way to merchants a number of days after they have been raised by the consumer. Choosing a partner who can accelerate the dispute notification process can help merchants reduce their chargebacks, improve customer loyalty, and save lost sales.

Further still, changes that improve communication among merchants and issuers throughout the dispute process can help reduce chargebacks, freeing up funds and resources that can be better directed towards core business growth. Implementing steps, such as setting up clear billing descriptors and fostering better merchant-issuer collaboration, can improve consumer loyalty for merchant and issuer alike. Merchants can also implement a solution that facilitates real-time dispute notifications, to review and resolve disputes faster to reduce time, resources, and costs associated with the chargeback process.

It is in the interest of all parties along the payment chain – for issuers, acquirers, and merchants – to implement improved dispute practices. Consumers will remain loyal if they encounter a positive brand experience, and merchants and issuers can see improvements in their bottom line.

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Exclusive: China’s Huawei, reeling from U.S. sanctions, plans foray into EVs – sources

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Exclusive: China's Huawei, reeling from U.S. sanctions, plans foray into EVs - sources 2

By Julie Zhu and Yilei Sun

HONG KONG/BEIJING (Reuters) – China’s Huawei plans to make electric vehicles under its own brand and could launch some models this year, four sources said, as the world’s largest telecommunications equipment maker, battered by U.S. sanctions, explores a strategic shift.

Huawei Technologies Co Ltd is in talks with state-owned Changan Automobile and other automakers to use their car plants to make its electric vehicles (EVs), according to two of the people familiar with the matter.

Huawei is also in discussions with Beijing-backed BAIC Group’s BluePark New Energy Technology to manufacture its EVs, said one of the two and a separate person with direct knowledge of the matter.

The plan heralds a potentially major shift in direction for Huawei after nearly two-years of U.S. sanctions that have cut its access to key supply chains, forcing it to sell a part of its smartphone business to keep the brand alive.

Huawei was placed on a trade blacklist by the Trump administration over national security concerns. Many industry executives see little chance that blocks on the sale of billions of dollars of U.S. technology and chips to the Chinese company, which has denied wrongdoing, will be reversed by his successor.

A Huawei spokesman denied the company plans to design EVs or produce Huawei branded vehicles.

“Huawei is not a car manufacturer. However through ICT (information and communications technology), we aim to be a digital car-oriented and new-added components provider, enabling car OEMs (original equipment manufacturers) to build better vehicles.”

Huawei has started internally designing the EVs and approaching suppliers at home, with the aim of officially launching the project as early as this year, three of the sources said.

Richard Yu, head of Huawei’s consumer business group who led the company to become one of the world’s largest smartphone makers, will shift his focus to EVs, said one source. The EVs will target a mass-market segment, another source said.

All the sources declined to be named as the discussions are private.

Chongqing-based Changan, which is making cars with Ford Motor Co, declined to comment. BAIC BluePark did not respond to repeated requests for comment.

Shares of Changan’s main listed company Chongqing Changan Automobile rose 8% after Reuters reported the discussions. BluePark’s shares jumped by their maximum 10% daily limit.

GROWING EV MARKET

Chinese technology firms have been stepping up their focus on EVs in the world’s biggest market for such vehicles, as Beijing heavily promotes greener vehicles as a means of reducing chronic air pollution.

Sales of new energy vehicles (NEVs), including pure battery electric vehicles as well as plug-in hybrid and hydrogen fuel cell vehicles, are expected to make up 20% of China’s overall annual auto sales by 2025.

Industry forecasts put China’s NEV sales at 1.8 million units this year, up from about 1.3 million in 2020.

Huawei’s ambitious plans to make its own cars will see it join a raft of Asian tech companies that have made similar announcements in recent months, including Baidu Inc and Foxconn.

“The novel and complicated U.S. restrictions on semiconductors to Huawei have slowly been strangling the company,” said Dan Wang, a technology analyst with research firm Gavekal Dragonomics.

“So it makes sense that the company is pivoting to less chip-intensive industries in order to maintain operations.”

In the United States, Amazon.com Inc and Alphabet Inc are also developing auto-related technology or investing in smart-car startups.

Huawei has been developing a swathe of technologies for EVs for years including in-car software systems, sensors for automobiles and 5G communications hardware.

The company has also formed partnerships with automakers such as Daimler AG, General Motors Co and SAIC Motor to jointly develop smart auto technologies.

It has accelerated hiring of engineers for auto-related technologies since 2018.

Huawei was awarded at least four patents related to EVs this week, including methods for charging between electric vehicles and for checking battery health, according to official Chinese patent records.

Huawei’s push into the EV market is currently separate from a joint smart vehicle company it co-founded along with Changan and EV battery maker CATL in November, two of the sources said.

(Reporting by Julie Zhu in Hong Kong and Yilei Sun in Beijing; additional reporting by David Kirton in Shenzhen; Editing by Sumeet Chatterjee and Richard Pullin)

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Facebook switches news back on in Australia, signs content deals

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Facebook switches news back on in Australia, signs content deals 3

By Renju Jose and Jonathan Barrett

SYDNEY (Reuters) – Facebook Inc ended a one-week blackout of Australian news on its popular social media site on Friday and announced preliminary commercial agreements with three small local publishers.

The moves reflected easing tensions between the U.S. company and the Australian government, a day after the country’s parliament passed a law forcing it and Alphabet Inc’s Google to pay local media companies for using content on their platforms.

The new law makes Australia the first nation where a government arbitrator can set the price Facebook and Google pay domestic media to show their content if private negotiations fail. Canada and other countries have shown interest in replicating Australia’s reforms.

“Global tech giants, they are changing the world but we can’t let them run the world,” Australian Prime Minister Scott Morrison said on Friday, adding that Big Tech must be accountable to sovereign governments.

Facebook, whose 8-day ban on Australian media captured global attention, said it had signed partnership agreements with Schwartz Media, Solstice Media and Private Media. The trio own a mix of publications, including weekly newspapers, online magazines and specialist periodicals.

Facebook did not disclose the financial details of the agreements, which will become effective within 60 days if a full deal is signed.

“These agreements will bring a new slate of premium journalism, including some previously paywalled content, to Facebook,” the social media company said in a statement.

The non-binding agreements allay some fears that small Australian publishers would be left out of revenue-sharing deals with Facebook and Google.

“It’s never been more important than it is now to have a plurality of voices in the Australian press,” said Schwartz Media Chief Executive Rebecca Costello.

Facebook on Tuesday struck a similar agreement with Seven West Media, which owns a free-to-air television network and the main metropolitian newspaper in the city of Perth.

The Australian Broadcasting Corp has said it was also in talks with Facebook.

Google Australia managing director Mel Silva said in a statement published on Friday the company had found a “constructive path to support journalism”.

She thanked Australian users of the search engine for “bearing with us while we’ve sent you messages about this issue”.

Facebook and Google threatened for months to pull core services from Australia if the media laws, which some industry players claim are more about propping up ailing local media, took effect.

While Google struck deals with several publishers including News Corp as the legislation made its way through parliament, Facebook took the more drastic step of blocking all news content in Australia.

That stance led to amendments to the laws, including giving the government the power to exempt Facebook or Google from mandatory arbitration, and Facebook on Friday began restoring the Australian news sites.

(Reporting by Renju Jose and Jonathan Barrett; Editing by Richard Pullin and Jane Wardell)

 

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China’s factory activity growth likely moderated during February holiday lull – Reuters poll

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China's factory activity growth likely moderated during February holiday lull - Reuters poll 4

BEIJING (Reuters) – China’s factory activity likely grew at a slightly slower rate in February as factories closed for the Lunar New Year holiday, a Reuters poll showed, although growth is expected to remain firm, buoyed by an early resumption of production.

The official manufacturing Purchasing Manager’s Index (PMI) is expected to dip marginally to 51.1 in February from 51.3 in January, according to the median forecast of 20 economists polled by Reuters. A reading above 50 indicates an expansion in activity on a monthly basis.

Chinese factories typically scale back operations or close for lengthy periods around the Lunar New Year holiday, which fell in the middle of February this year.

However, the resurgence of COVID-19 cases in the winter had prompted local governments and companies to dissuade workers from travelling back to their hometowns, giving a boost to the earlier-than-usual resumption of production at many factories, analysts say.

“Although government COVID-19 prevention measures may constrain some manufacturing activities in the near-term, the fact that a majority of migrant workers stayed in their workplace cities for the holiday should facilitate an earlier resumption of business activity following the holiday this year,” said analysts at Nomura in a note to client on Thursday.

Wang Zhishen, a migrant worker from Gansu, told Reuters that his factory, a manufacturer of logistics boxes in the manufacturing hub of Dongguan, only closed for three days during the holiday, thanks to overwhelming businesses. Lured by the 1,500-yuan cash subsidy his factory offered, he chose to work through the holiday.

The Chinese economy has largely shaken off the gloom from the COVID-19 health crisis, with consumers opening up their wallets after months of hesitation. Growth is now set to rebound sharply this quarter, also helped by the low base effect of a year ago.

The country has successfully curbed the domestic transmission of the COVID-19 virus in northern China, with the national health authority reporting zero new local cases for the 11th straight day. Cities that were on lockdown have since vowed to push for a work resumption at full speed.

The official PMI, which largely focuses on big and state-owned firms, and its sister survey on the services sector, will both be released on Sunday.

The private Caixin manufacturing PMI will be published on Monday. Analysts expect the headline reading will dip slightly to 51.4 from 51.5 in January.

(Reporting by Stella Qiu and Ryan Woo; Editing by Sam Holmes)

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