The Hidden Threat for Merchants
In 2022, the loss to consumers due to fraud ticked up to $8.8 billion, an increase of 44% from 2021.
Chargebacks are a powerful tool for safeguarding consumers against credit card fraud, erroneous charges, or even poor-quality products and services. In chargeback disputes, the cardholder’s bank usually backs them up and refunds the charge amount from the merchant’s bank.
Banks and credit card companies have made it exceptionally simple for customers to dispute a charge, often to the point where it is quicker for them to contact their bank rather than the merchant. It has been observed that, following a chargeback, the purchasing behavior of consumers toward a merchant goes down by as much as 62%. However, it is important to note that more than 80% of chargebacks can be avoided if the customer first contacts the merchant.
“Banks are making it a lot easier for customers to dispute charges; they want to keep their customers happy, and with the growth of dispute inquiries, an increasingly competitive landscape, and the ever-evolving demands of their cardholders, banks have no choice but to make the process as easy as possible for their customers,” states Monica Eaton, CEO of Chargebacks911, the world’s first chargeback mitigation and prevention service provider.
Yet, “the Chargeback Triangle,” involving the consumer, merchant, and bank, is a loophole that is often exploited by consumers.
Reports suggest that 86% of chargebacks are probable “friendly fraud” cases. Friendly fraud occurs when a buyer fraudulently tries to initiate a chargeback with their bank or card issuer by falsely claiming that the product was defective, not delivered, or unauthorized, instead of directly requesting a refund from the merchant.
In 2022, the average value of a chargeback was $192.53, with 23% of consumers admitting to committing friendly fraud. Merchants are now expected to pay over $100 billion in chargebacks in 2023.
Chargeback remediation can reverse the downward trend. Chargeback management solutions provide automated tools to reduce the time and resources required to respond to chargebacks, along with the help of agnostic solutions that assist merchants and financial institutions to standardize and automate otherwise manual processes every step of the way.
“Online retailers must make it easier for customers to reach out to their business by providing contact information that is easily visible to their customers. They must provide personal and exceptional customer service and ensure that all return policies, shipping costs, fees, and sales tax are explained up-front and easily understood,” advises Monica Eaton.
