Credit card disputes at Visa Inc. 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 in a presentation, before rising 24% in 2020 during the pandemic and about 2% a year in 2021 and 2022.
Despite being easy for consumers to file, making it one of the most-common credit card frauds, disputes are an opaque part of the payments industry. Both Mastercard Inc. and American Express Co. declined to provide disputes data. Visa and Mastercard both bought dispute prevention companies in 2019, Verifi Inc. and Ethoca Ltd., respectively, and regularly promote their offerings at conferences.
Disputes can be costly and onerous for both credit card companies and merchants to process, while chargebacks, when a dispute results in a refund, cost merchants dearly — about $2.40 for every dollar disputed, according to Visa’s Verifi, or as high as $3.36 for every dollar, according to Mastercard’s Ethoca.
A survey by Justt Ltd., a startup 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 Inc., 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 Ltd., stand to benefit. The Tel Aviv-based company works with brands like Prada SpA, GoPro Inc., and Peloton Interactive Inc. and is expected to increase revenue by about 15% this year. Venture capital has also taken note — Justt raised $70 million in several rounds in 2021.