The digitization of buying and selling transactions is energizing the payment methods sector, an increasingly challenging yet dynamic and constant scenario. It is a landscape that presupposes the significant growth of commerce, such as e-commerce, thanks to changes in society’s consumer habits and the buying and selling culture in Brazil.
In 2024, circumstances related to survival challenges and the expansion of operations, given the number of competitors and the increasing investment rates, were experienced by this market category, with significant technological advancements, due to innovations, digital trends, and the choices offered to the consumer regarding new payment models.
Growth of Brazilian e-commerce
As a separate segment in the payment methods market, e-commerce has its specificities regarding the responsibilities in the operations it performs and the transactions it engages in, especially when it comes to purchase cancellations and chargebacks. Augustinho Mariano, Director of HPay Meios de Pagamentos Ltda, highlights factors of great evolution in e-commerce, but there is some concern about the fees for online transactions. Today, those responsible for transactions made in online businesses must worry about compliance, technology, and tools investment costs, in order to increasingly mitigate the risks related to purchase cancellations; however, the major concern is still how to calibrate the cost of fees charged to the end customer, mitigating some of the operation risks. The truth is that chargeback is unavoidable in an e-commerce operation, from transaction abandonment reasons to actual fraud,” states the executive.
According to a study conducted by Google in partnership with Euromonitor, by 2025, Brazilian e-commerce is expected to grow by 42%. Mariano comments that in order for online stores to protect themselves from the risks of fraud in the face of this growth and to avoid potential disputes with buyers, acquirers must take the lead in supporting the discovery of new anti-fraud tools, an investment that needs to be made by acquirers and provided to their partners directly connected to their platforms, whether it be a payment gateway or even the commercial establishments. ‘Anti-fraud tools are very important and come close to being compared with a face-to-face transaction, such as 3DS. All card schemes should require investment in 3DS from acquirers and issuers and provide it to the market and e-commerce platforms. This is an inevitable growth, just like the search for more protection tools,’ says the Director of HPay. Regarding 3DS, the executive highlights the importance of investing in this authentication protocol, which covers three essential domains within the context of payment methods, including acquirers, issuers, card schemes, and payment methods, to facilitate, in real-time, the exchange of information, including transaction details, payment method, and the device used to make the purchase.
Who really pays for a purchase dispute?
The chargeback process, including recovery, request, compliance, and pre-compliance, is ancient and brought about by the evolution of buyer-seller relationships. ‘When there are people definitively interested in resolving the chargeback issue on both ends, meaning the cardholder interested in resolving their desire to cancel their purchase and demonstrate integrity on one side, and the responsibility of the issuer to question the acquirer, along with the acquirer’s interest in contacting the merchant on the other, it will form a network of ideal events that will enable identifying the party responsible for the chargeback cost,’ ponders Mariano.
The executive believes that the five elements of the purchase cancellation process, which are the cardholder, issuer, acquirer, payment gateway, and the merchant, must come together to identify the party responsible for the chargeback, but when there are failures in one of these elements, only the payment gateway, a service that captures credit card transactions for online transactions, ends up taking responsibility for the process most of the time. ‘When there is integrity in the actions of all elements, there is a possibility of identifying the responsible party for the chargeback, which becomes difficult when we encounter failures in any part of the five elements,’ considers the Executive.
Recovery of the disputed amount from a purchase cancellation to avoid surcharges
According to ABECS, the association representing companies in the electronic payment sector, Brazilians make an average of 120 million payments per day. In the first semester of 2024, card usage surpassed the level of 22 billion transactions, the highest result ever recorded for a semester. These are numbers that define the daily risks experienced by companies, regardless of the market in which they operate, such as payment disputes and the cardholder’s request to dispute the amount spent on a purchase they wish to cancel, stipulating that the costs of these risks need to be controlled and that there is a value to be recovered with this cancellation. “There is only a surcharge on operations when the chargeback level is very high. At that moment, the card brands analyze the CNPJ of the main responsible person at the time of capturing the transaction at the endpoint, whether it be a payment gateway or a direct merchant, who has its own e-commerce operation and notices that he has exceeded 0.50% of his monthly transactional between cancellation limit and chargeback,” explains the executive. “For the card brands, cancellation and chargeback are calculated as a single action, putting them in the same evaluation bucket. Many transactions canceled by the commercial establishment are also included in the process of excessive chargeback, which the brand uses to monitor the payment gateway and the commercial establishment itself,” points out.
Daily, companies operating online face countless risks, but the fact is that these risks can go beyond just a purchase cancellation. “The merchant needs to be 100% aware of the product they sell. The number of fraud risks increases according to the value added to the product. Today, the acquirer already offers the opportunity, within the dispute, to present documentation for e-commerce, a possibility that commerce did not have until recently,” confesses Mariano. “Within the chargeback process, this action became very similar to face-to-face transactions. In order for the merchant to mitigate risks, they must ensure the buyer’s data and verify that it is indeed the buyer purchasing the product, requesting as much information as possible, while respecting the Data Protection Laws, for example. From the moment the merchant chooses to know their product and not just focus on financial gains, they begin to create layers of difficulty in the face of fraud incidents, with materials that prove to the acquirer in a possible dispute that the buyer indeed made the purchase, while still maintaining some ease so as not to lose the genuine customer. This way, they will further mitigate the risks of their commerce,” assures the Executive.
Educating the merchant and the commercial establishment: a necessity for the Brazilian payment culture
The executive argues that it is necessary to have a culture of education regarding the good practices that commerce must put into practice to effectively sell its product. “I always comment on issues related to the culture of payment methods. The security of operations in Brazil is, without a doubt, one of the most efficient when it comes to the financial system and payment methods, and in my view, one of the best in the world. When I talk about integrity, I mean putting buying and selling transactions into practice correctly. The owner of the commercial establishment is concerned with his business because he needs to buy, sell, and profit, the main objective, while also managing his growth. There is a lot of information that precedes the search for a culture of security at the time of sale. Often, it is important for the merchant to trust even more in the acquiring executive, responsible for bringing the payment methods product to him,” says the HPay Director, when talking about the lack of security knowledge in payment methods that merchants throughout Brazil face when thinking about selling their product online. “With nearly 30 years of experience in the payment methods market that I have experienced, I see that over 90% of Brazilian commercial establishments, active for over a year, do not have the habit of reconciling their receipts because they do not have time for it, as at the end of the day they are already concerned about the next day, working to ensure that their commercial establishment grows. When these merchants have someone to reconcile, it is done manually. It is important that the culture of payment methods is generated alongside the commercial establishment by those who bring the payment methods product to their door.”, concludes the executive.
KSK Exceptions Chargeback as a major driver of culture in digital exception handling
Unlike manual handling of chargebacks and purchase cancellations at the cardholder’s request, which are usually carried out in Brazil, the KSK Exceptions Chargeback product offers the acquirer the opportunity to handle these digitally and in a streamlined manner. “KSK Exceptions Chargeback is capable of handling 90 to 105 cases per day, returning an average of 75% in treatment automation because it is a well-structured, assertive, reliable product that can control chargebacks,” says Luciana Munhoz, Operations Specialist at Kstack, a specialized startup responsible for the digital chargeback treatment product KSK Exceptions Chargeback.
The product presents a positive business strategy and maximizes operational team performance, resulting in lower cost impacts by acting digitally, robustly, and serving both physical and online sales. It also offers automatic rules and facilities to handle payment reversals, even with increasing sales
