The Growing Need for Transaction Clarity and Digital Transformation

The Growing Need for Transaction Clarity and Digital Transformation

September 9, 2021

By Jason Howard, Executive Vice President, Ethoca

Who hasn’t looked at their bank statement at one point and thought, “wait a minute, what’s this transaction again?” The seemingly random string of numbers and letters listed are often no help in recognizing purchases, either. In most cases though, these confusing statement descriptors are perfectly legitimate purchases. But many of them still result in chargebacks and inadvertent “friendly fraud,” costing merchants and financial institutions time and money.

Consider how visual our lives have become since the advent of the internet. Online and off, the things we interact with daily are created to be highly intuitive with a heavy emphasis on user experience (UX). As the saying goes, design is 99 percent invisible. Yet, when you are looking at a digital bank statement there is often a lack of detail, both in the text and visually, to help customers understand their purchase history.
Better design in the post-transaction experience, emphasizing clarity and rich visual cues, can reduce friendly fraud resulting from transaction confusion and improve customer experiences.

What is friendly fraud?

Friendly fraud occurs when a customer claims a legitimate charge as fraud. This could happen for multiple reasons—but often, it’s that they fail to recognize the charge on their bank statement. It might also be a case of someone else making a purchase without the knowledge of the cardholder, such as a family member. The cost of this and other kinds of card-not-present (CNP) fraud is expected to bring the total value of chargeback disputes to $35 billion globally in 2021.

In some cases, friendly fraud might be better termed “accidental fraud,” as it can result from customers misunderstanding their account statements. This is difficult for merchants to address effectively—by the time they are alerted to a transaction being disputed, often it’s too late for them to remedy the situation. It’s generally best to address customer concerns immediately when and where they’re being raised—often in banking channels like online or in-app bank statements or contact centers.

A study has found that 73 percent of cardholders call the issuer first when they question a charge, with one in four dispute calls the result of confusion over statement descriptors. While larger companies may have customized their statement descriptor to be clearer, smaller companies may not have paid much attention to what their customers see on their statement.

Much of the reputational damage and cost to companies from friendly fraud could be prevented by giving customers the information they need in a clear manner. In a recent study, 96 percent of consumers reported wanting more detailed transaction information. So, how can the payments industry go about delivering it to them?

What your customers expect

In most parts of their life, your customers are getting fully transparent information that makes the most of what digital technology is capable of, but this is not always the case with digital bank statements.

Companies that we interact with daily, from social media giants to car manufacturers, make their user interfaces as intuitive to use as possible, whether that’s web pages or dashboards. In both examples, as much information as possible is conveyed to users without overwhelming them. In cars, this is achieved in part by having a shared language of symbols: everyone who drives knows that a triangle inside another triangle means hazard lights, and if a manufacturer used a different symbol, drivers would be confused.

Consumers live in a highly designed world, except when it comes to communicating the vitally important information of their purchase history. In this space, most financial institutions, and other businesses present minimal information, largely because there’s no other easily viable solution.

The missing design element in e-commerce

Ethoca Feature 090921

Prevention is always better than cure, and it’s important to prevent unnecessary friendly fraud while also increasing customer engagement for both merchants and financial institutions.

Currently, a charge on our statements is little more than a name (which could be unclear), a value and a date. If a customer cannot recognize the name, they’ll likely call their bank and possibly initiate a chargeback, even if the charge was ultimately legitimate. Digital statements could be much more visual, with company logos next to every charge and clear merchant names. Once a logo is present, it helps reduce confusion about whether a charge is legitimate or not by making it easier to remember where something was purchased from.

This also has applications in fraud prevention: if you know that all your purchases with a particular retailer will have the same logo on your statement, then you will know to check any that do not have that logo even if they have a similar name.

The way forward is to leverage collaborative, near-real-time technologies that can help share this level of information easily between merchants and financial institutions. This will empower cardholders to better recognize their transactions and make more informed judgments about when a transaction isor isn’tlegitimate, providing not only a better UX, but one that also helps minimize friendly fraud and chargebacks.

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