With new platform, WorldPay targets the chargeback process

That's the word that most comes to mind if you ask any online retailer about a chargeback, which occurs when a payment is disputed and funds need to be, effectively, returned to sender.

It's not just the mere reversal of funds; that part's easy. It's making sure that money gets where it needs to go. Retailers just don't have time to spare to manage things like this. The incentive is compliance, not revenue.

Global payment processing firm WorldPay this morning announced its Dispute Management System, or DMS for short, which it says automates the monitoring and processing of chargebacks and Requests for Information, which precede actual chargebacks.

If you're unfamiliar with the process from a retailer's point of view, it goes like this:

1. A customer has a problem with a transaction -- perhaps they didn't receive an intended delivery -- and asks their bank or credit card company for their money back.
2. The card issuer checks whether the request is reasonable; if so, it makes a provisional credit payment to the customer.
3. Now the chargeback process actually begins. An associated bank sends a Notification of Chargeback (NoC, for short) and a Request for Information (RFI, for short) to you, the retailer.
4. Ignore the RFI and the funds are taken, unchallenged; reply, and begin negotiating with the card issuer on whether the return is warranted, per the regulations associated with the card in question.
5. If material you, the retailer, provide satisfies the card issuer's criteria, you keep the money. Fail to meet those criteria -- or more importantly, fail to respond to them on time -- and the bank takes the money.

You can see why technology would be welcome here. WorldPay says its platform can help shepherd these requests through, saving the retailer time and, in the case of failed responses, money.

There's an additional variable, too. There's a type of fraud called "customer-not-present," or CNP for short, that involves the unauthorized use of someone's credit card online.

(We laypeople generally just call this "identity theft," though I'm sure there are plenty of other words to use that probably aren't fit for publication on ZDNet.)

It's a major problem -- banking giant HSBC says it's the most prevalent type of fraud in the UK, its major market -- and, as you can see above, the process incentivizes thieves to overload the system so that purchases fall through the cracks.

WorldPay hopes that DMS keeps the chargeback trains running on time. With good reason: slow-footed retailers could have their merchant online accounts suspended.

Quick points about the platform:

• Allows merchants to bulk upload documents for review.
• Bolts-on to existing WorldPay services Acquirer and Payment Gateway; together, they should give retailers a detailed electronic record (and audit trail) of chargeback history.
• Allows for privileged access to the data via user accounts.
• Has an early warning alert system if a retailer is approaching their "hurdle rate" -- in essence, the ratio of whether or not it's financially worthwhile to pursue a chargeback.

The company didn't offer pricing information.

WorldPay says it piloted the platform with "global merchants across a number of vertical sectors" prior to launch, though it declined to name names. We'll see if others readily adopt the platform.