Monday , February 6, 2023

Visa Agrees to Buy Verifi As Payments Players Wrestle With Rising Chargebacks

Visa Inc. on Friday announced it will buy Verifi Inc., a 14-year-old, Los Angeles-based provider of tools that allow merchants, acquirers, and issuers to resolve chargebacks. Visa, which did not announce terms for the deal, said it will integrate Verifi’s technology with risk-management capabilities from CyberSource and CardinalCommerce, companies the card network acquired in 2010 and 2017, respectively.

The deal for Verifi comes as concerns in the payments industry over chargebacks have risen in recent years. Chargebacks occur when buyers return merchandise or express dissatisfaction with a service and request a reversal of the charge on their cards.

Experts cite so-called friendly fraud as a major source of the reversals. This fraud, in which buyers request a chargeback but keep the merchandise, probably accounts for as much as 86% of all chargebacks, according to data from Chargebacks 911, a Clearwater, Fla.-based chargeback-management service. At the same time, losses from friendly fraud are rising at a rate of 41% every two years, according to the data, which doesn’t cite the actual dollar volume. Overall, U.S. chargeback volume on payment cards will grow from $6.1 billion on 81 million transactions in 2018 to $8.6 billion on 115 million transactions in 2021, according to projections from Aite Group, a Boston-based consultancy. “There’s a lot of abuse out there with friendly fraud,” notes Julie Conroy, a research director at Aite.

Visa a year ago responded to the problem with a new program called Visa Claims Resolution, which included among other things new reason codes and shorter timelines for cardholders, banks, and merchants to file and resolve disputes.

With the acquisition of Verifi, this process could become simpler and quicker. The company’s technology provides near-real-time links to connect parties involved in a disputed transaction, with the aim of resolving the dispute before the transaction becomes a chargeback. Verifi claims more than 25,000 client accounts globally. The deal is also seen by some as a competitive response to Mastercard Inc., which in March announced it is acquiring Ethoca Inc., a rival to Verifi. “Once Mastercard picked up Ethoca, it was only a matter of time before Visa bought Verifi,” says Conroy.

“The addition of Verifi’s technology to Visa’s risk-management solutions will introduce greater collaboration and insights to help resolve disputes quickly,” said Mary Kay Bowman, Visa’s global head of seller solutions, in a statement. “Verifi’s technology and expertise will extend these capabilities to more partners across the payments ecosystem.” Bowman was head of payments at Square Inc. before joining Visa in January.

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