Despite the widespread implementation of prevention software, Visa Inc. continues to experience a surge in credit card disputes, a trend that began during the pandemic and persists due to the growth of e-commerce and inflation.
Data from the payment company reveals that disputes on Visa’s network exceeded 90 million in 2022. In 2019, there were just over 70 million disputes. The number surged by 24% in 2020 during the pandemic and has been increasing by around 2% annually in both 2021 and 2022.
Credit card disputes, while easy for consumers to file, remain a somewhat opaque aspect of the payments industry. Mastercard Inc. and American Express Co. have not disclosed their disputes data. In 2019, both Visa and Mastercard acquired dispute prevention companies—Verifi Inc. and Ethoca Ltd., respectively—and frequently promote their solutions at industry conferences.
Processing disputes can be a costly and cumbersome task for both credit card companies and merchants. Additionally, chargebacks resulting from disputes, which lead to refunds, can be financially burdensome for merchants, costing them approximately $2.40 for every dollar disputed, according to Visa’s Verifi. Mastercard’s Ethoca estimates the cost to be as high as $3.36 for every dollar.
A survey conducted by Justt Ltd., a startup specializing in automated dispute processing, revealed that over three-quarters of consumers in the UK and US filed a dispute in the past year. However, there is no consensus on who ultimately bears the financial burden.
The surge in disputes is largely attributed to the ongoing shift towards online shopping since the onset of the Covid-19 pandemic, with inflation playing a secondary role. Some retailers, including major players like Walmart Inc., even advise customers to use the credit card dispute system to resolve refund disagreements, rather than handling disputes internally. Searches for “credit card dispute” on Google have seen an uptick since 2019.
Publicly traded companies focused on combating credit card fraud, such as Riskified Ltd., are poised to benefit from this trend. The Tel Aviv-based company collaborates with brands like Prada SpA, GoPro Inc., and Peloton Interactive Inc., and is projected to see a revenue increase of roughly 15% this year. The venture capital community has also taken notice—Justt secured $70 million in funding across multiple rounds in 2021.
