In her time using Square as a payments processor, Stephanie Rubio’s digital marketing agency had never had a customer challenge a card transaction.
So the May 14 email came as quite a surprise. Rubio was told that, beginning in seven days, 20% of the payments her SoVerve Marketing Group received through Square would be held as a reserve against any future disputes. The money wouldn’t be available for four months.
“I wasn’t expecting that at all,” Rubio said. “I get this email in the middle of COVID. It threw me for a loop because I’m already having to make drastic pivots in my business.”
The world’s biggest payment companies have grown increasingly worried about a surge in disputed card transactions at retailers, especially as the coronavirus pandemic stifles economic activity. The pain is particularly acute among smaller “mom and pop” shops that get by on thin margins in the best of times and are often unaccustomed to dealing with demands for chargebacks on purchases.
“You’ve had merchants that weren’t in the dispute game all that much needing to understand these rules,” said Colleen Taylor, head of merchant services at Wells Fargo, which has also begun requesting additional reserves. “If we see they’re experiencing the ‘double whammy’ as we call it of reduced charge volume and increased chargebacks and refunds, we’re reaching out.”
Transactions for more than $7.5 billion of goods were disputed in 2019, according to the consultancy Aite Group. And now consumers are flocking to banks to dispute charges, often for purchases of trips or concerts that were canceled. As the pandemic worsened, chargebacks climbed by about 25% compared with a year ago, according to Chargebacks911, which helps retailers manage disputes.
“A lot of these retailers don’t even know how to address chargebacks and now they’re hit with thousands,” said Monica Eaton-Cardone, chief operating officer of Chargebacks911.
Rubio’s SoVerve was among a wave of businesses affected by Square’s actions in recent weeks. Starting in late March, the company created reserve requirements for certain sellers, including those who collect payments in advance or those with a high rate of customer disputes.
“Like most payment processors, we may use reserves to enable riskier businesses to continue processing payments through Square while ensuring these sellers are able to cover issues like disputes, refunds, or outstanding fees without running a negative balance on their accounts,” Square said in an emailed statement. It said fewer than 1% of its sellers have reserves.
Processors like Square and dozens of other firms help retailers handle billions of card transactions every year, taking a fee each time a card is swiped. The role is typically that of a profitable middleman, but can carry risk. While it usually falls to the merchant to resolve a disputed transaction, if that business goes under, the payment processor is left to make sure the consumer is made whole.
That’s why firms have begun requiring retailers to increase reserves, which act as a rainy-day fund. Some merchants, including Rubio, say they haven’t seen an increase in chargebacks but are already facing higher reserve requirements.
The reserve will “protect you and Square from unexpected loss events,” Square said in an email to another customer, which was used as an exhibit in a lawsuit filed against the company over the practice in May. “We realize this is a challenging time for many business owners and we remain committed to supporting you.” Square declined to discuss the suit.
For retailers, it’s not just canceled plans that are causing the increase in card disputes. The pandemic prompted a massive shift to online commerce — which is more prone to fraud — as businesses across the country remain shuttered and consumers look for no-contact ways to buy goods.
That means some of the surge stems from a quirk in the rules set by payment networks like Visa and Mastercard. Merchants can avoid being liable for in-store purchases by upgrading point-of-sale systems to accept chip cards. No similar mechanism exists for online purchases.
“Small merchants, as they’ve scrambled to make sure they can be relevant in this new normal for all of us, they’re also now bringing on the liability for those transactions,” said Nicole Jass, a senior vice president at Fidelity National Information Services Inc.
The world’s biggest payments companies often say the ability to dispute a transaction is a key reason consumers are comfortable using electronic payments. Banks in recent years have sought to streamline the dispute process, and it can take just a few clicks to charge back a purchase.
Those moves rankled retailers, who can be charged a fee of as much as $50 every time they face a dispute. And merchants contend they’re seeing something known as “friendly fraud,” in which consumers dispute legitimate purchases rather than return goods for a refund.
“Friendly fraud is hard to quantify, given that the genuine consumer has conducted the transaction and is subsequently disputing it,” Aite Group said in a report last month that showed 16% of consumers admitted to perpetrating such fraud.
In response to the pandemic, Visa implemented a monitoring program to help reduce the volume of invalid disputes. American Express is extending the amount of time merchants have to respond to a dispute to 30 days.
“For many businesses, it’s the first time they’re experiencing this,” said Max Neukirchen, head of merchant services at JPMorgan Chase. “And we want to help them on their journey. A lot of these changes will stick even after we reach some form of normal again.”
Novatti partners with leading global card payment company UnionPay
ASX-listed Australian fintech company Novatti Group Limited, a leading digital banking and payments company, has partnered with leading global card payment company, UnionPay.
UnionPay has more than 8.4b cards issued globally and a network spanning 179 countries and regions, highlighting its immense scale.1 In Australia alone, UnionPay is accepted by 90% of ATMs, 85% of point of sale terminals, and by major retailers such as Coles and Target.2
The partnership with UnionPay will drive growth in Novatti’s core payment processing business, with Novatti appointed as a UnionPay acquirer, providing UnionPay customers with access to Novatti’s merchant and transaction services across Australia.
The partnership will benefit other Novatti businesses, including ChinaPayments, Novatti’s China-focused, cross-border payments platform, which enables Chinese residents to pay Australian bills in Chinese currency. UnionPay has already been integrated into ChinaPayments, with transactions using UnionPay accounts already taking place. Further, ChinaPayments will shortly be integrated into the UnionPay app, providing eligible UnionPay users with direct access to ChinaPayments.
The partnership with UnionPay adds to Novatti’s growing list of tier-one global partners, including Visa, Alipay, WeChat Pay, Google Pay, Samsung Pay, Marqeta, and Decta. Growing commercial relationships and payments processing networks with these major partners underpins a core pillar of Novatti’s long-term revenue growth strategy, leveraging Novatti’s existing platforms and infrastructure to deliver more services and gain a greater share of wallets with our customers.
Managing Director of Novatti, Peter Cook, said, ‘We are thrilled to be partnering with UnionPay, a leading global card payment company. Through this partnership, Novatti will drive continued growth in our payment processing business, delivering further value from our existing platforms and technology.’
1. UnionPay International – https://www.unionpayintl.com/en/aboutUs/companyProfile/introductiontoUPI/ & https://m.unionpayintl.com/wap/en/mediaCenter/newsCenter/marketUpdate/7157.shtml
2. UnionPay International – https://m.unionpayintl.com/wap/en/mediaCenter/newsCenter/marketUpdate/6932.shtml
flexigroup announces strategic partnership with Mastercard
FlexiGroup announce a partnership with Mastercard to expand the application and distribution of bundll, the world first buy now pay anywhere platform built by humm. Already live in Australia, bundll allows customers to buy now pay later everywhere Mastercard is accepted and bundll their purchases into easy to manage instalments with inbuilt budgeting services.
Under the agreement, Mastercard will work with its partners to drive adoption and will support the development of the open-loop, work anywhere, pilot. The platform is able to support different integration and commercial models to achieve scale in different markets.
The agreement is for five years and is expected to deliver a sustainable growth path for humm, at the same time as expanding the services that schemes can provide to customers.
Richard Wormald, Division President, Mastercard Australasia said, “While there are lots of BNPL platforms around the world, this latest development for bundll is differentiated in the way it is able to partner with existing banking systems and provide BNPL technology and products without needing to sign up local retailers, while still generating a sustainable revenue stream. With the growth of BNPL, Mastercard understands that many issuers around the world are looking to solve for this increasing consumer preference.”
flexigroup CEO Rebecca James said, “The bundll platform is unique as it offers a turnkey but flexible solution to banks and other card issuers around the world. You don’t need to sign up merchants or integrate into legacy bank systems, and it will work in any regulatory environment.
“bundll’s proprietary affiliate programme also creates revenue sources globally, and creates a curated and unique shopping experience that is based on customer preference, not which retailer is paying for the click. Discussions are already well progressed with a number of banks under the strategic agreement.”
First strategic partnership for humm ventures
The partnership with Mastercard is the first announcement of humm ventures, an initiative designed to spearhead innovation between the Company and new partners. humm ventures will enable local and global companies to partner with flexigroup to utilise its substantial product and technology offering within their own ecosystem.
humm CEO Rebecca James said, “flexigroup has significant technology and data expertise within its market leading product suite, and through humm ventures we will collaborate and partner with the world’s best technology and payments companies to realise that potential. It will significantly increase the distribution potential for our technology stack so that our products can thrive in our partners’ ecosystems, without impacting our core business. We are excited about the opportunities that humm ventures will create to expand our market and the geographies in which we operate.”
Sephora Singapore Ropes in Atome to Offer Buy Now, Pay Later Payments
French beauty retail giant Sephora Singapore has partnered with Atome, a buy now, pay later service, to offer customers flexible payment options across its e-commerce website, mobile app as well as physical stores in Singapore.
Atome launched its service in December 2019 and now reportedly partners 1,500 online and offline retailers across verticals including fashion, beauty, homeware and lifestyle.
This partnership allows customers to split their purchases into three equal payments over time with zero interest, hidden charges or annual fees.
Sephora has 12 physical outlets in Singapore, an e-commerce website and mobile app, offering their range of products including makeup, skincare, fragrance, haircare, bath and body and more.
Alia Gogi, President of Sephora Asia, said:
“The shopping behaviour and profile of Sephora customers has evolved in the last few years, but especially so this year. They now not only expect a secure, seamless and easy payment experience but also flexibility and choice in how they shop and pay for their beauty products online, on mobile and in-stores.
We’re delighted to partner with Atome in introducing ‘buy now, pay later’ flexible payment options to first our Singapore, and later Malaysian customers, enhancing their shopping experience both online and in our stores.”
David Chen, CEO of Atome, said:
“We’re really humbled to partner Sephora, a global brand that is not only a leader in beauty and retail, but is also constantly evolving and staying on the forefront of the latest consumer shopping behaviours and payment trends.
We’re thrilled to be able to offer Sephora customers in Singapore, and later Malaysia, a safe, easy and flexible payment experience, especially as we enter the festive end-of-year shopping season.”
Featured image credit: Unsplash
GB & Partners invests €6 million in DiPocket
GB & Partners Investment Management Ltd. marked September with a 6 million Euro investment to further expand its fintech portfolio, advancing EXIM Cross-border Fund to take majority ownership of DiPocket Ltd.
DiPocket, registered as well as licensed in the UK and holding an e-money licence (while it has also recently received an e-money license in Lithuania (https://investlithuania.com/news/uk-fintech-dipocket-establishes-cee-base-in-lithuania/) enabling it to continue serving its clients across Europe after BREXIT), is the newest member of EXIM Cross-border Fund’s portfolio that is managed by GB & Partners Investment Management. GB & Partners’ continuous professional support will fast track DiPocket to become a dominant B2B financial service provider in the CEE region.
The company’s visionary founders (Fedele DiMaggio and Pavel Pokhylchenko), its 1,5 million EUR sales revenue of 2019, its international operations in more than 10 countries and its stable cooperation with Mastercard® since their founding in 2015 provide ample justification for the fund manager’s confidence.
The mission of GB & Partners,with its 100% holding company, Tomahawk Ltd. (the direct shareholder in DiPocket) is to bring unparalleled professional talents under one roof by uniting its fintech companies in a logically architected, extensive and diverse portfolio.
The fund manager sees the unique peculiarities of the multi-currency, multilingual region as an exceptional economic opportunity. DiPocket’s unique technical and IT capabilities coupled with the convenience of domestic IT knowledge and capacities, explain why Hungary could prove to play a key role (in addition to the Lithuanian center) in the region’s digital financial market. DiPocket offers a unique occasion according to its previous accomplishments and present competence.
“Coupling financial muscle with relevant industry expertise and a strong business network in our core Region, GB & Partners is the springboard we had been looking for to propel DiPocket into its next stage of development” – said Fedele Di Maggio, co-founder and CEO of DiPocket.
„The ambition of GB & Partners is not only to enter the regional, but also the wider European fintech picture. We would like to see DiPocket in an even more advantageously competitive situation and we will work on accelerating it to a track of exponential growth, backed by Hungarian expertise. Not only do we provide capital support and structural assistance, but also hire proven to be successful professionals like Márton Báti and Ádám Farkas through the management of Tomahawk” – explained Gábor Bürchner, chief investment officer of GB & Partners.
In contrast to the operational patterns of Revolut or Transferwise that are already established in the region and are very much focusing on serving the end-user, DiPocket puts the emphasis on the very custom needs of its corporate clients who choose to form the brand experience for their customers in accordance with their own cashless financial service needs. Among others, such as payment solutions for festivals or gift cards for shopping centers in the form of branded physical or digital Mastercard® cards. In addition to its product packages DiPocket also develops ancillary solutions like custom-made automated services, such as syncing invoicing with bookkeeping whilst communicating in real-time with the bank. Particularly effective for both large corporate clients and SMEs. These even more efficiently designed proceedings open up new horizons for companies at large.
„The flexible, trustworthy and innovative financial solutions of DiPocket are able to help Hungarian companies enter international markets, and also to strengthen their domestic positions” – continued Gábor Bürchner.
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