Burbank Secures $6 Million Funding to Combat Online Fraud and Chargebacks

Table of Contents

1. Key Highlights
2. Introduction
3. The Problem of Chargebacks
4. Innovations in Transaction Security
5. Market Trends and Industry Response
6. Impacts on the Future of Online Transactions
7. Conclusion
8. FAQ

Key Highlights

• Funding: Burbank has raised $6 million to support the development of its groundbreaking "Card Present over Internet" (CPoI) technology.
• New Payment Method: The new tool allows customers to make secure online payments by tapping their cards against their phones and entering a PIN, similar to in-store transactions.
• Industry Impact: This technology aims to reduce fraudulent chargebacks and enhance customer and merchant trust in online transactions.

Introduction

In the landscape of eCommerce, a staggering one in every hundred online transactions is disputed, resulting in costly chargebacks for merchants globally. This scenario paints a picture of an industry grappling with the twin challenges of consumer fraud and complex transaction disputes. Amid these concerns, Welsh FinTech company Burbank is making a significant move to address these issues head-on, raising $6 million to launch a pioneering payment solution dubbed “Card Present over Internet” (CPoI). This innovative tool not only seeks to replicate the familiar in-store tap-and-PIN experience in an online environment but also aims to transform how online transactions are conducted—offering a promising avenue to tackle the ballooning problem of chargebacks that plague many eCommerce businesses today.

The Problem of Chargebacks

Chargebacks have become a “fact of life” in the commerce world, representing both a protective measure for consumers against unauthorized transactions and a significant operational challenge for merchants. According to recent reports, the customer dispute process can lead to funds being withheld from merchants until the final decision is made by the card issuer. The complexities involved create a ripple effect, negatively impacting a merchant's cash flow, customer relations, and sometimes even leading to penalties from payment processors when chargebacks become prevalent.

Burbank’s CEO Justin Pike emphasizes the necessity for a consistent payment experience across channels. “The payment experience should be the same for everyone, regardless of channel,” he stated in the funding announcement. “Now, for the first time ever, we’re enabling the same process in online channels. Simple, secure, and scalable.”

Understanding Chargebacks

Understanding the intricacies of chargebacks is vital for grasping why Burbank’s new technology is a potential game-changer. Common reasons for chargebacks include:

• Fraudulent Transactions: Where the cardholder claims they did not approve the payment.
• Product Not Received: Customers often dispute transactions when items are not delivered as promised.
• Product Quality Issues: Disputes arise when items do not meet customer expectations based on descriptions.
• Technical Errors: System failures leading to unauthorized transactions can also trigger chargebacks.

The implications of increased chargebacks are severe; they can result in not just financial loss but also reputational damage, necessitating better systems for transaction verification and fraud management.

Innovations in Transaction Security

Burbank's funding will primarily focus on developing its unique CPoI tool. This technology aims to seamlessly integrate a familiar payment method into the digital sphere, utilizing the strengths of existing card-present transactions known for their security and integrity.

Features of the CPoI Tool

1. Tap and PIN Functionality: Customers will be able to securely tap their card against their mobile device and enter their PIN, ensuring the transaction’s legitimacy.
2. Familiar User Experience: The design mimics in-store payment processes, reducing friction for consumers accustomed to such methods.
3. Enhanced Security: By utilizing card-present technology in online transactions, Burbank aims to mitigate fraud risks significantly.

Comparison to Traditional Payment Methods

Traditional online payment methods often require consumers to enter card details manually, exposing them to various risks, such as phishing and data breaches. By contrast, Burbank’s tap-and-PIN system minimizes exposure to fraud:

• Security Beyond Passwords: Entering a PIN adds a layer of security that password-based systems often lack.
• Consumer Familiarity: The process mirrors a trusted in-person experience, potentially increasing customer confidence and reducing disputes.

Market Trends and Industry Response

The growing number of chargebacks in eCommerce, coupled with an increase in online fraud, has prompted many businesses and payment service providers (PSPs) to seek robust solutions. According to a study conducted by PYMNTS Intelligence focusing on Australia, 44% of merchants indicated that limiting chargebacks is a key priority. This statistic is reflective of broader sentiments in eCommerce, highlighting the need for innovations similar to those being developed by Burbank.

Widespread improvements in the eCommerce landscape are underway, particularly among middle-market firms generating less than $1 billion in revenue. These businesses are increasingly motivated to enhance their payment systems in response to the growing demand for secure, efficient transactions.

Real-World Implications

The financial implications of chargebacks can be severe, leading to:

• Increased Operational Costs: Processing disputes can be resource-intensive.
• Customer Relationships: A high rate of disputes can damage trust and long-term customer loyalty.
• Fines from Payment Processors: Merchants facing numerous chargebacks may incur fees, compounding their financial challenges.

This makes Burbank’s focus on creating a solution that addresses chargebacks timely and crucial for both eCommerce and consumer trust.

Impacts on the Future of Online Transactions

Burbank's initiative may represent a transformative approach in the digital payment sphere, setting a new standard for the integration of card-present tactics in an online format. With the recent funding and the drive towards enhancing consumer confidence in online payments, Burbank may pave the way for:

Enhanced Acceptance of Innovation

• Increased Merchant Adoption: As chargeback concerns grow, merchants may be more inclined to adopt technologies that promise better security.
• Consumer Acceptance: Participants in the marketplace may embrace this model if it leads to a better overall shopping experience without compromising security.

Transferable Insights to Other FinTech Innovations

The strategies and technologies developed by Burbank could serve as a case study for future ventures in the FinTech sector, providing insights on how to align with larger payment industry challenges.

Conclusion

As Burbank moves forward with its $6 million funding to enhance digital payment experiences through innovative technology, it stands at the intersection of need and opportunity. By employing solutions that directly address the dual challenges of fraud and chargebacks, Burbank aims not only to capture a share of the eCommerce market but also to redefine consumer trust in online transactions.

In a time where digital fraud is an alarming reality, Burbank's developments offer a welcome promise of security and familiarity in the digital wallet era, likely transforming the landscape of digital transactions.

FAQ

What is Burbank’s CPoI tool?

Burbank’s Card Present over Internet (CPoI) tool enables customers to make payments online by tapping their card against their mobile device and entering their PIN, mimicking the in-store payment experience.

Why are chargebacks a concern for merchants?

Chargebacks represent disputes where customers contest transactions, leading to withheld funds and potential penalties for merchants. An increase in chargebacks can negatively impact a merchant's cash flow and customer relationships.

How does the CPoI tool improve security against fraud?

By employing a secure tap-and-PIN payment method, the CPoI tool minimizes the risks associated with traditional card-not-present transactions typical in online payments.

What potential impacts could Burbank’s funding have on the eCommerce industry?

The funding may enable the development of innovative payment solutions that enhance transaction security, potentially reducing fraud and improving consumer confidence, which is paramount in the evolving eCommerce landscape.

When can consumers expect to see this technology implemented?

While specific timelines have not been disclosed, Burbank is actively working on deploying the CPoI technology, signaling a proactive approach to enhancing digital payments in the near future.

By addressing these fundamental challenges head-on, Burbank is poised to make a lasting impression on how online payments are conducted, promoting a healthier and more secure digital marketplace.