Preparing for expected surge in disputes during COVID-19

The COVID-19 pandemic is affecting all sectors of the U.S. economy, which will likely result in a sharp rise in payment card chargebacks. Is your credit union prepared?

In an average year, the U.S. payments industry processes 25 million payment card disputes, according to Mercator. Given that U.S. consumers conduct about 70 billion card transactions a year, the number of card disputes is typically a small fraction of those transactions (0.0357%, to be precise). Since the COVID-19 outbreak started, consumers have been making fewer transactions on non-essentials. Under normal circumstances, logic suggests that fewer transactions would result in less payment card disputes. However, things are anything but normal right now. At PSCU, we have prepared for the influx of disputes, even with 85% of our staff transitioning to work from home.

Here are four reasons why credit unions can expect to see an increase (and in some categories, a dramatic increase) in disputes and resulting chargebacks.

1. Some merchants may not be able to respond to consumers who attempt to address their dispute with them directly, as cardholders are instructed to do. Merchants may be stuck at home without access to their back-office payment systems, or are short-staffed due to quarantined employees who might normally handle customer service or order fulfillment. Many merchants have had to lay off staff, causing workloads to overflow.

 

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