In a Bid to Fight Chargebacks, Sift Gleans Data Via Integrations With PayPal and Adyen

Fresher data flowing directly from payments platforms could mean more effective remedies against chargebacks, some observers say. On Tuesday a major risk-management firm acted on that theory with a service that allows sellers to factor in information regarding chargebacks and disputes that flow through integrations with PayPal Holdings Inc. and Adyen NV, two of the world’s biggest processors.

The integrations, forged by the anti-fraud technology firm Sift, feed into Sift’s Dispute Management service, permitting merchants to receive data directly, route disputes according to payment-network rules, and see updates on outcomes, according to Santa Clara, Calif.-based Sift.

These new integrations have “already” resulted in reduced rates of fraud and higher rates of acceptance for users, Sift says, though numbers were not immediately available.

In a related development, Sift announced it is introducing new machine-learning capabilities for Dispute Management that are intended to help merchants forge responses to customer disputes in ways that can maximize the likelihood of winning them.

The new service could be especially helpful for merchants caught between rules updates from the card networks, Sift says. “Chargebacks have become increasingly difficult to fight and win for merchants,” said Neeraj Gupta, chief technology officer at Sift, in a statement. “With disparate rules and updates for each card network … fraud teams need to streamline how they respond to and successfully fight disputes.”

Cardholders can file chargebacks when they suspect a charge appearing on a statement has been fraudulently performed using the consumer’s card information. In other cases, fraudsters will perform transactions with the intent of charging them back for a refund. In yet other cases, ordinary consumers will take the opportunity to claim a refund by using a chargeback—a method the industry has dubbed “friendly fraud.”

This chargeback category has been rising alarmingly in recent years as an alternative to the traditional request for a refund. All told, the ease of filing chargebacks is expected to cost merchants an estimated $117.5 billion this year, according to an estimate from Mastercard Inc.

The problem of rising “friendly-fraud” chargebacks has prompted responses from risk-management firms. In a recent development, Chargeback Gurus in December launched a predictive-analytics engine it said could pinpoint transactions cardholders are likely to dispute, despite the transaction being legitimate.