Imagine that you are reading your bank statement and among your transactions—the Netflix subscription, a coffee at that place near work—there is one that you don’t recognise. It’s unclear who the company is, as there’s no name on the billing descriptor, but a series of numbers and letters. Worse still, it seems that you’ve paid hundreds of pounds to this mystery company. What do you do?

If the answer is ‘immediately contact your bank to start a chargeback,’ in some cases you’d be right to do so, as cybercrime costs the UK alone £27 billion per year, and that figure is only growing. The idea that funds can be stolen digitally is now widely accepted, but typically funds won’t be taken directly from your account by ‘hacking’ the bank, but instead by deception. It is far more likely that your details were used to make a purchase on a legitimate website, or you were tricked into making a purchase on a fake site. 

The problem of transaction confusion

What happens if that unrecognisable transaction was legitimate? Chargebacks911’s Cardholder Dispute Index shows that 58% of consumers find card statements confusing—the leading reason for why cardholders disputed charges—and nearly 20% find them confusing ‘very often.’ More than half (53%) have started a dispute without attempting to contact the merchant first. This isn’t surprising; if a consumer doesn’t recognise the payment, then it’s unlikely that they will know who to contact. 

Transaction confusion often arises because merchant descriptors on statements aren’t clear. It might be that they have used a code that shows up as a series of numbers and letters, or the name used by a merchant might not align with the brand the consumer recognises. For instance, a purchase from an online retailer might appear as a parent company name, leaving consumers scratching their heads.

Around 47% of the merchants surveyed in the 2023 Chargeback Field Report admitted that they’d never even checked their descriptor for how it appears on billing statements, an issue that merchants can easily amend to protect their revenue.

The cost of confusion for merchants

When consumers don’t recognise transactions, they may assume fraud and initiate a chargeback. Essentially a forced reversal of the transaction, the consumer’s bank steps in to retrieve the money from the merchant’s account. And while this process was designed to protect consumers from fraud, it has significant implications for merchants.

Chargebacks are costly for merchants, both financially and reputationally. There’s the immediate financial loss when a chargeback is issued, as they not only lose the sale but often incurs a chargeback fee that can range anywhere from £15 to £100 per dispute, depending on the merchant’s agreement with their payment processor. Over time, the accumulation of such fees can significantly affect a business's bottom line.

Furthermore, merchants with a high chargeback rate may see their processing fees increase. In extreme cases, they might even have their ability to process credit card payments suspended entirely, which can be devastating for businesses, particularly those operating online.

In addition to these direct financial costs, chargebacks also hurt a business’s reputation. Even if a chargeback is ultimately found to be unjustified, the consumer may walk away with a negative impression of the merchant, believing they were either scammed or poorly informed. This could result in lost customer loyalty and potential damage to the brand.

Why transaction confusion occurs

While it's easy to blame consumers for being too quick to initiate chargebacks, the onus largely falls on merchants to provide clearer information. The root of the issue often lies in poor merchant descriptors, which do not accurately reflect the name of the business or the nature of the transaction.

For example, a purchase from a restaurant chain may appear on a statement under the name of the parent company rather than the restaurant itself. Or, in some cases, abbreviations or technical names used by payment processors might show up instead of the brand name. This confusion is especially prevalent with online transactions or purchases from businesses with multiple branches or franchises.

In a world where purchases are often automated, and consumers may not always get an immediate receipt, it’s easy for such confusion to spiral into disputes. Merchants, then, must take proactive steps to avoid these scenarios.

How merchants can tackle transaction confusion

To reduce the risk of transaction confusion and the chargebacks that follow, merchants need to focus on clear communication. Here are a few strategies to consider:

1. Optimise merchant descriptors: Merchants should work with their payment processors to ensure that the names appearing on bank statements are easily recognisable by consumers. Ideally, the descriptor should match the name of the business as closely as possible. If this isn’t feasible due to the business structure, consider including additional information, such as the location of the purchase, website name, or customer service phone number, to help consumers identify the transaction and prompt them to contact the merchant first.
2. Provide instant receipts: One of the simplest ways to reduce confusion is to ensure that consumers receive an immediate receipt via email or SMS for every transaction. This can serve as an additional reference when they review their statements later.
3. Proactive communication: For larger or more unusual purchases, consider sending a follow-up email that includes details of the transaction, the amount spent, and what the charge will look like on the consumer’s bank statement. This can help bridge the gap between purchase and payment, making it easier for the consumer to recall the transaction.
4. Streamline customer support: When confusion does arise, it’s crucial that consumers can easily reach out to the merchant for clarification. Having clear and accessible customer support options can significantly reduce the likelihood of a chargeback. In fact, the Chargebacks911 report highlights that over half of all chargebacks could potentially be resolved by direct communication between the consumer and merchant.

Providing clarity and ensuring trust 

The complexity of the digital payment ecosystem isn’t going away anytime soon. As consumers continue to shift towards online shopping and digital transactions, it’s imperative that merchants prioritise transparency and clarity. Failure to do so not only risks unnecessary chargebacks but could also damage long-term customer relationships.

In today’s competitive marketplace, clear communication isn’t just a nice-to-have—it’s a business imperative. By taking steps to reduce transaction confusion and unrecognisable billing descriptors, merchants can protect their bottom line while building trust with their customers.

To learn more, visit: https://chargebacks911.com. 

About the author: Roger Alexander advises Chargebacks911 on expansion and the launch of its dispute resolution solution for rising APP fraud claims.