Chargeback Deficiencies Jeopardizing Real-Time Platforms, Expert Warns
"First we need to establish, across all card schemes, consistent and fair standards for chargeback process and management."
Real-time payments may be cutting-edge for credit unions, but one industry pro says a lack of dispute-resolution mechanisms could send card fraud through the roof.
Although a growing number of platforms help credit union members settle transactions quickly, when members have a problem with a transaction or want their money back, there’s often little in the way of help — which makes life easier for fraudsters and harder for credit union executives and their members, according to Global Risk Technologies CIO and Chargebacks911 COO Monica Eaton-Cardone.
“The pitfall is there’s no dispute mechanism, there’s no chargeback mechanism, and in the hurry to just get something into the market because payments are such a hot topic, we’ve forgotten that infrastructure that really needs to be in place,” she told CU Times in an interview.
Some platforms do get involved in disputes, Eaton-Cardone noted, but she was particularly concerned about the Federal Reserve’s forthcoming FedNow Service.
“I think, first of all, because it is supported by the government and it may end up getting some adoption, unlike if another company started it…automatically you have this trust. And that can be dangerous,” she said.
The Fed should adopt consistent standards and processes for handling chargebacks before rolling out the system, Eaton-Cardone warned. Otherwise, fraud could rise and trust in the system could plummet, she added.
The number of real-time payment systems in use around the world rose by 35% over the past year and has nearly quadrupled since 2014, according to research earlier this year from FIS, which provides technology solutions for merchants, banks and capital markets.
However, card-not-present fraud has also risen sharply, Eaton-Cardone noted.
“First we need to establish, across all card schemes, consistent and fair standards for chargeback process and management. Once we have a universally applicable process for managing fraud and disputes, we can start talking seriously about instantaneous payments,” she said.