Despite being limited to 20 – 25 characters (including spaces), the purchase descriptor in a card statement is the best means by which an issuing bank and merchant can convince a cardholder that he or she has actually made the purchase and reduce chargebacks. In a world where many of us are challenged to communicate in 140 characters or less, 20-25 presents a true test.
Nonetheless, many merchants take the time to carefully craft their descriptors, experimenting with different terms until they arrive at something that reduces cardholder inquiries. Let’s take a moment to discuss the two types of billing descriptors and – despite the minimized space – the opportunities they present to avoid chargebacks and keep cardholders informed and satisfied.
The Default Billing Descriptor (static) is the merchant’s authorized processing company. This descriptor appears the same for every transaction and should clearly state who the cardholder conducted business with. This is the first and best opportunity to remind the cardholder of the transaction and – if there are any questions regarding the charge – offer the cardholder the opportunity to connect directly to the merchant via a toll-free number.
Ideally, this toll-free number should connect the cardholder to a live person (as opposed to a time-consuming phone tree). The live person should be qualified to address any questions and – if needed – make adjustments to the transaction before the matter is referred to the issuing bank.
The Dynamic Descriptor is the more customizable description in the cardholder statement and allows for merchants to provide additional details. Dynamic descriptors can be modified according to the product or service purchased and even configured on a per-transaction level making it possible for each transaction to have a different description. In many cases, well-designed dynamic descriptors contain details that dispel cardholder concerns and ensures recognition and acceptance of the charge.
In some cases, dynamic descriptors are an ideal opportunity to break down charges that included tips - a perfect opportunity to remind the cardholder of the restaurant experience or the ride in the taxi.
Simply put, communication is key. Confusing descriptors lead to confused cardholders contacting their issuing bank and – more often than we wish – a subsequent chargeback. Merchants are routinely out-of-the-loop in this stage, often learning about the matter after the chargeback occurs.
In many cases, the cardholder actually made the purchase, but sincerely does not recognize the descriptor language. According to a recent study by Visa Inc., this type of friendly fraud is growing at approximately 41% per year, costing merchants and card brands billions of dollars in lost revenue. The ability for cardholders to dispute charges in real-time through their issuing banks often leaves the merchant out of the loop until late in the process when a billing dispute becomes a full-blown chargeback. Making billing descriptors as clear and helpful as possible is the first line of defense against chargebacks.
For merchants who wish to further strengthen their risk management (and counter un-friendly fraud), the ideal second line of defense toward countering chargebacks is multifaceted operation that enables merchants to manage fraud and chargebacks in real-time. By integrating directly with card issuers and redirecting disputes from the issuer to the merchant for resolution, disputes can be resolved before they escalate and become chargebacks.
For example, new technology enables the online banking platform or issuing bank’s call center to drill down from the detailed descriptor to investigate the details of each disputed transaction. This level of information can reduce cardholder confusion while creating a positive experience by providing the cardholder with the information they need to remember the transaction.
These solutions enable everyone to win as merchants avoid costly fees, fines or penalties while issuers experience lower operating expenses while supporting cardholder satisfaction through timely resolution. Ideally, we would all want friendly fraud to be eliminated at the descriptor phase. By sweating the details (all 25 characters of them), we can certainly reduce it through carefully crafted descriptors, followed by a vigorous chargeback abatement operation.
Matthew Katz is CEO at Verifi.