Firstly, I assume this only impacts chargebacks that come under the "fraud" category. Where a consumer just tells their card issuer "it wasn't me", but in fact it was them. Ok great...
The chargeback "defence" or "arbitration" system for both parties is a joke, that's the real problem that is being glossed over here. And that includes systems with decent UX (eg. stripe).
As a merchant, if a user puts in a fraudulent chargeback, you can currently defend it with all the evidence / proof in the world - and the card issuer can still process the chargeback. The incentives are aligned for them to do that in fact.
As a consumer, chargebacks are an incredibly important mechanism. But equally the evidence you provide is normally just for the card provider. That information is never passed onto the merchant, just the high level "category" of the chargeback. The merchant has to guess at what actually went wrong, or reach out to the customer and ask them to provide all the same information over again. If a user made a genuine mistake (eg. Didn't recognise the transaction), there is no "cancel" button. There is a whole convoluted process for withdrawing a chargeback. The saving grace for consumers is that card issuers just tend to side with the end-user. The merchant is left clueless as to what the user's real issue was.
But the unspoken downside is that these cases end up in small claims courts, that are a drag on the court system, and potentially end up with the end user having a court judgement against them because they provided some misleading information and didn't realise the consequences.
There has to be a better system - I'm just not sure this change is it. It just shifts the category of fraudulent chargebacks to a different one.
The chargeback "defence" or "arbitration" system for both parties is a joke, that's the real problem that is being glossed over here. And that includes systems with decent UX (eg. stripe).
As a merchant, if a user puts in a fraudulent chargeback, you can currently defend it with all the evidence / proof in the world - and the card issuer can still process the chargeback. The incentives are aligned for them to do that in fact.
As a consumer, chargebacks are an incredibly important mechanism. But equally the evidence you provide is normally just for the card provider. That information is never passed onto the merchant, just the high level "category" of the chargeback. The merchant has to guess at what actually went wrong, or reach out to the customer and ask them to provide all the same information over again. If a user made a genuine mistake (eg. Didn't recognise the transaction), there is no "cancel" button. There is a whole convoluted process for withdrawing a chargeback. The saving grace for consumers is that card issuers just tend to side with the end-user. The merchant is left clueless as to what the user's real issue was.
But the unspoken downside is that these cases end up in small claims courts, that are a drag on the court system, and potentially end up with the end user having a court judgement against them because they provided some misleading information and didn't realise the consequences.
There has to be a better system - I'm just not sure this change is it. It just shifts the category of fraudulent chargebacks to a different one.