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Beyond Representment: Preempting Friendly Fraud

subta logo Written By: The SUBTA Team
Category: Customer Experience

Contributed by Platinum SUBTA Resource Partner, ChargebackHelp

Photo by Jp Valery on Unsplash

Did you know your customers can easily call their bank and receive a refund for any credit card purchase they made from you? At best, they may not recognize the purchase on their bank statement; at worst they’re abusing the chargeback policies of their bank.

Either way, you lose your product and your revenue, just like that. It’s called chargeback fraud, commonly known as “friendly fraud”; it’s a growing and costly problem which too many merchants are doing nothing about.

In this article, we’ll look at merchant solutions to friendly fraud. We’ll explain representment, which until recently has been the merchant’s only recourse to recover revenue from fraudulent chargebacks. We’ll explain services like Visa’s VMPI, which can prevent the disputes that become chargebacks. And we’ll look at how merchants can get the most out of these solutions to recover revenue and fight back against friendly fraud.

The Problem

In a perfect world, you make a sale and you get the money, end of story. However, in these days of rising credit card fraud, more consumers are scrutinizing their bank statements and some are even openly gaming the system.

Credit Cards and bank statements

When a cardholder sees a charge they don’t recognize, they call their bank. Banks routinely grant chargebacks to refund their customer, almost as a common courtesy. Chargebacks are so easy that anyone can abuse them to get your product and take their money back too.

As a result, this “friendly fraud” is now the fastest-growing ecommerce crime. Visa reported that in fiscal year 2012, merchants faced a total $11.8 Billion in loses from this type of fraud. By comparison, identity theft totaled $2.7 billion in the same year. Visa estimates that rates of friendly fraud increase roughly 20% each year, meaning the 2019 number has more than doubled since 2012.

The Solution: Representment

When the merchant makes a sale, they submit the transaction to receive the funds from the customer bank; this is called “presentment.” Chargebacks reverse the presentment process. Hence, “representment” is re-submitting a presentment that was reversed by a disputed transaction. It’s the merchant asserting their right to that transaction’s revenue.

Until now, a merchant could only pursue representment after the first presentment is declined by a chargeback; the merchant’s revenue is returned to the cardholder before the merchant can do anything. The merchant then has to represent the charge with any additional “compelling evidence” to prove the cardholder made the purchase. The merchant pays the chargeback penalties and their processing score takes a hit, even if their representment succeeds. Representment has been such a hassle that most friendly fraud chargebacks go unchallenged by merchants.

Compelling Evidence

Successful representment depends entirely on the merchant submitting “compelling evidence.” This evidence consists of any and all data captured from the transaction that ties the customer to the purchase. For starters, this includes all the information entered at the point of sale, into the merchant’s payment gateway: billing, shipping & IP addresses, device ID, and credit card & CVV numbers. If your gateway is PCI-compliant — meeting the standards and best practices set out by the credit card associations — these data points will be captured for every transaction.

However, it’s also important that your data capture goes beyond the gateway, into fulfillment and customer service. This includes proof of delivery for tangible goods or downloads and logins for digital goods. Any further interactions you can tie to the customer, like chats, phone calls or support emails, will also improve your chances of successful representment. These data points should be captured by your CRM.

Most important of all is that you can gather, store, and access this information securely and promptly to respond to any chargeback you intend to fight. This information is then batched into a rebuttal letter and submitted to your acquiring bank. Your bank, in turn, presents this letter to the cardholder’s bank for review and approval.

The obvious benefit to representment is that the merchant can then recover revenue from a sale that they would’ve otherwise lost to a chargeback. However, you still pay the chargeback fee, and the chargeback still goes into your sales-to-chargeback ratio. When chargebacks exceed 1% of sales, fees go up and you can endanger your ability to process credit cards.

Wouldn’t it be great if you could submit all this information before the chargeback? Well good news, everyone, now you can!

Preemptive Representment

Transaction descriptors are a leading cause of illegitimate chargebacks. They don’t convey enough information for the cardholder to recognize certain transactions, increasing the likelihood of a chargeback. The cardholder’s bank is equally limited in the information, increasing the likelihood of friendly fraud. Visa and MasterCard and their newly acquired proxies Verifi (Visa) and Ethoca (MasterCard) have all developed APIs that can now send compelling evidence in real-time to both cardholders and their banks.

If a transaction descriptor confuses a cardholder, they can now drill down into it on their online statement and get better product descriptions, merchant contact info, delivery confirmations, purchasing device ID and more. Likewise, the issuing bank can also see this information, making fraud easier to detect. It’s all sent in real-time, before the cardholder can even scratch their head, let alone file a chargeback. Think of it as a preemptive representment.

While this is a substantial improvement to the representment process, it is a new development, so its implementation is still cumbersome. Visa’s VMPI, MasterCard’s MasterCom, Verifi’s Order Insight and Ethoca’s Eliminator all provide APIs to send this data to the issuing banks. For comprehensive coverage, you need to use all four services. Each service requires a complex integration with your gateway and CRM of well over 100 data points for each API; and each API requires maintenance updates as the process evolves and improves.

Merchant Options

Merchants can either manage their chargebacks in-house or outsource to a third-party specialist. A landmark 2018 study into ecommerce fraud by think tank Javelin Strategy & Research found that in-house “fraud shops” typically cost businesses up to 20% of their operating budget. Furthermore, Javelin found that every dollar of fraud costs these businesses $2.40 to manage. Fraud and chargebacks can easily divert time, money and resources away from a company’s core business and negatively impact their bottom line.

That’s why outsourcing to a third-party chargeback management company is the more cost-effective option. Full disclosure, ChargebackHelp is a chargeback management company. We provide merchants with a single endpoint to resolve chargebacks, issue representments, and leverage the various APIs to preempt chargebacks.

Chargeback management services like ChargebackHelp save merchants the time, money and resources that fighting fraud and chargebacks requires. We integrate all issuing bank dispute alerts into a single platform and merge it with merchant gateways and CRMs. Merchants can manage the alerts and initiate representment themselves, have us do it, or even completely automate the process. VMPI, Order Insight, Eliminator and MasterCom APIs are also fully integrated and maintained.


Merchants can recover their revenue from chargebacks through the process of representment.  Representment requires merchants to send “compelling evidence” that ties the cardholder to the disputed purchase. However, even when representment is successful, the chargeback still stands, as do the attendant fees.  Merchants can now preempt chargebacks with their compelling evidence using APIs from Visa, MasterCard, Verifi and Ethoca.

These new APIs are definitely a welcome innovation for merchants. You don’t have to wait until your revenue is charged back before you can react to a dispute. However, merchants still need to present their compelling evidence to cardholders and their issuing banks, and now they need to do it instantly.

Whether it’s through representment or these cool new APIs, protecting your revenue in-house diverts resources that could be better spent on your core business. Merchants can find themselves spending up to 20% of their operating budget dealing with transaction disputes in-house. Outsourcing chargeback management frees those resources up and lowers the overall cost of fraud on your business.

Find out more about managing chargebacks, representment, and steps merchants can take to protect their revenue at


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Written by Mike Conway – Director of Marketing and Communications, ChargebackHelp
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