According to CB Insights, an average person in the US makes around seventy payments per month. This does not sound like a lot until a two-page bank statement comes listing all those transactions.
In this jumble of numbers, codes, and balances, how does a person recognize which transaction refers to which purchase? This is where statement descriptors come into play.
Statement descriptors allow merchants to provide context behind the transactions listed on a bank statement. Find out how statement descriptors work, why merchants should use them, and what the best implementation practices are.
What is a Statement Descriptor?
A statement descriptor (also known as a billing descriptor or merchant descriptor) refers to the text and numbers used to describe a transaction on a bank statement. They serve the purpose of reminding the customer where they spent their money.
Besides informing customers about the origin of a transaction, merchants use statement descriptors as a friendly fraud prevention tool and for representment during a chargeback dispute. Statement descriptors help reduce chargeback rates by providing as many details about a purchase as possible within a short format.
Note: Check out our articles to learn more about different types of ecommerce fraud, such as friendly fraud and payment fraud.
Types of Statement Descriptors
There are four types of statement descriptors:
- Soft (pending) descriptor
- Hard (final) descriptor
- Static descriptor
- Dynamic descriptor
Soft (Pending) Descriptor
A soft descriptor (also called a pending descriptor) is used as a placeholder for a hard descriptor, and it appears on a bank statement when a transaction is authorized but not settled.
Hard (Final) Descriptor
A hard descriptor (also called a final descriptor) replaces the soft descriptor once the transaction is settled.
A static descriptor is the same on all customers’ bank statements, regardless of the details of individual purchases. The term can refer to the entire statement descriptor or just the first part (the prefix).
Static descriptors work best for businesses that sell a sole product or service or a limited range of products or services. Additional reasons a business owner chooses to implement a static statement descriptor are:
- They prefer the way it looks.
- They believe that customers will understand the origin of the transaction once it appears on their bank statements.
Using a static statement descriptor is not recommended practice as no one can guarantee that customers will recognize who initiated the transaction and why, increasing the chances for a chargeback to occur.
A dynamic descriptor refers to the suffix of a descriptor that changes according to the properties of an individual purchase. Merchants can configure dynamic descriptors to show details such as:
- Product name
- Product category
- Date and time of purchase
- Order identification number
Dynamic descriptor suffixes work best for businesses with a range of products or services. Dynamic suffixes are more descriptive than static ones, and they are unique to every individual transaction, making them a crucial part of every ecommerce fraud prevention strategy.
Statement Descriptor Requirements
Every statement descriptor must meet the following requirements:
- Be 5-22 characters long (if the descriptor consists of a static prefix and dynamic suffix, the prefix must be 2-10 characters long).
- Contain at least one (Latin) letter in the prefix and suffix.
- Not contain the following special characters: < > \ ‘ “ *.
- Reflect the business’s DBA (doing business as) name.
- Contain more than one common term or a website URL*.
*A website URL is only acceptable if it is clearly related to the transaction the descriptor describes.
Setting up a Statement Descriptor – Best Practices
The following are the best practices for setting up a statement descriptor for an online business.
- Keep it simple. Ensure the descriptor is accurate and straightforward. Subscription services, such as Netflix and Spotify, have the simplest possible descriptors: NETFLIX.COM and SPOTIFY (+ location of nearest headquarters), respectively.
- Use the URL of the online shop as the merchant's name. If the business is an ecommerce shop, it makes perfect sense to include the shop’s URL in the statement descriptor because the customer will know where the transaction happened.
- Include contact information. Including a shortened link or phone number in a statement descriptor allows customers to contact a merchant, get more details about the transaction, and report unauthorized transactions.
- Test your descriptors. Testing descriptors allows merchants to understand the customer’s perspective and whether the descriptor makes sense. Businesses use test credit card numbers to perform test transactions to check that the descriptor is displaying on bank statements as intended.
Statement Descriptor Examples
The following examples are provided to help merchants create a statement descriptor according to the best practices mentioned above.
Examples of Good Statement Descriptors
- Brand name + location. This example works well for brands with a limited product range or subscription services.
- Brand name + location + subject of purchase. Suppose a merchant called Swimmer is selling swimming suits in Arizona. The company’s statement descriptor could be SwimmerAZBikiniBottom, or Swimmer AZ Bottom Wear.
- Brand name + contact information. Apple Music and Hulu include the URL of their billing page on bank statements (apple.com/bill, hulu.com/bill).
Examples of Bad Statement Descriptors
- Brand name without contact information or subject of purchase. Suppose a customer shares a credit or debit card with a household member. If the other person is not informed about the transaction, the charge from a brand will seem suspicious, especially if not accompanied by purchase information. This increases the risk of chargebacks.
- Random letters and numbers. A set of random letters and numbers provides no information about a transaction, making it appear fraudulent and causing customers to request chargebacks.
- Generic descriptors. Ecommerce stores powered by Shopify or WooCommerce will receive these platforms’ default descriptors: “WOOCOMMERCE.COM” or “SHOPIFY.COM.” To customers who are not familiar with ecommerce platforms, this will appear either as fraud or an unwanted subscription.
The global fraud rate went down by 25% during Q1 of 2022, mainly due to security upgrades performed by financial institutions, and consistent implementation of fraud prevention tools and practices. One of those tools is the statement descriptor.
Use the information and examples in this article to create an authentic and trustworthy statement descriptor. This way you will enhance your online business’s reputation and protect it from fraud.