PayPal’s new strategic partnerships with Visa and MasterCard combine the power of the world’s largest payments and digital payments networks. Both deals have provisions that will impact heavily on how customers will purchase goods and services.
Let’s start with the Visa agreement: in addition to signalling a new era of collaboration, the deal gives customers the option to make Visa payments on the PayPal platform. This will mean a huge new user base for Visa and its tokenisation services. In return, PayPal will gain access to the Visa Digital Enablement Programme, meaning its digital wallet will be accepted at all retail locations equipped for Visa contactless transactions.
PayPal will also work with issuers so that consumers are presented with an easy option to move their Automated Card House (ACH) (or FPS in the UK; SWIFT in Europe) account options to Visa-branded cards.
MasterCard will similarly be a “clear and equal” payment choice in the PayPal wallet, and PayPal will gain access to the company’s instore mobile-tap tools.
Visa and MasterCard stand to profit from the fees they will collect from the rise in transaction volume, and while PayPal may incur higher transaction costs, additional incentives and increased brick-and-mortar transactions should help to offset this.
From a consumer’s point of view, online and instore payments are likely to get a whole lot easier and for merchants, this is great news.
At Global Risk Technologies™, we know first-hand the importance of a smoother checkout process in boosting conversion rates. Our advice for merchants however, would be to approach the opportunity with an element of caution.
The rise in chargebacks – 7% transaction growth vs. 20% increase in chargebacks, according to JPMorgan Chase – suggests that despite efforts to promote ACH linked accounts, the addition of Visa and MasterCard to wallet solutions like PayPal, may actually result in an increase in card-generated transactions, under the protection veil of “PayPal”, thus increasing friendly fraud.
But this doesn’t mean you have to be a victim, there are ways to fight back quickly and without huge costs.
What merchants must do to avoid more chargebacks:
- Keep detailed records of all purchases so fraudulent chargebacks can be challenged immediately with the consumer and banks.
- Work with the banks wherever possible to get the outcome you want – the records mentioned above will give you the credibility to fight your corner more effectively.
- Improve customer service, including the training of staff. If staff are responsive, and act with speed, to genuine complaints and try to resolve the issues, then customers are less likely to resort to chargebacks.
- Make sure a comprehensive and easy to understand customer service and returns policy is available online in a prominent position. As above, genuine customers will generally go to the merchant, but if they have no or a delayed response they are happy to go to the banks for a solution. Take the opportunity for a resolution while it is there.
- Tackle issues if it is your fault such as poor delivery. Do not give the opportunity for friendly fraud to happen.