The History Behind Chargebacks

The Moral Compass That Lost Direction.

Written by Rebekah Moss 26 Jul 2019 - 2 minutes reading time

Chargebacks have a history of negatively affecting business. Whilst much can be said about the 81% of consumers who can easily file a chargeback through the majority of issuing banks; the history of a chargeback originated much differently.

What are Chargebacks?

Chargebacks were first and foremost implemented to protect the customer in the use of credit cards against fraud. As e-commerce emerged and grew, the use of credit cards adapted. Merchants were left unprotected in the resulting breach in chargeback claims. Known as friendly fraud, chargeback claims are on the rise. With only 4% of dissatisfied customers contacting a company for a resolution or refund, that leaves a 96% margin to be filled with chargeback claims and disputes.

Who’s at risk?

Costing the Merchant 1.47% of their total revenue; clothing, high-end merchandise, furniture and easily resalable products fall most at risk to chargeback claims. A small proportion of chargeback claims fall into Merchant products failing to meet consumer expectations; or billing or clerical errors. Whilst the majority at 26% and 30% respectively, come down to the product failing to be delivered to the customer – only a small number of products were purchased by a stolen credit card.

As the number of claims increases, customer service considerations fall into the intentional decision to file a chargeback. Although 49% of chargebacks are unintentionally filed, there is an increasing demand for optimised communications between Merchants and consumers. A study from 2015 found that 80% of customers expected email responses to their queries within an hour, down from 4 the year before; and 66% of customers in 2018 expected live chat responses in less than 10 minutes. With friendly fraud on the rise, chargebacks are expected to cost Merchants upwards of £20 billion a year by 2020.

What to do?

As NASDAQ predicts that 93% of purchases will be facilitated by the online marketplace in 2040, the growing issue of chargebacks must be mediated. E-commerce in the UK totalled £137.38bn last year alone, accounting for 16% of retail sales overall. With a difficulty placed on Merchants to overrule the legitimacy of chargeback claims without compelling evidence, Total Processing is on hand to uncomplicate and absorb the process for you.

Sources:

www.chargebacks911.com/chargeback-stats/

www.thechargebackcompany.com/chargebacks/

www.totalprocessing.com/blog/the-dangers-of-online-payments

www.blog.salecycle.com/stats/11-best-ecommerce-stats-2018-far/#

www.nasdaq.com/article/uk-online-shopping-and-e-commerce-statistics-for-2017-cm761063

www.thechargebackcompany.com/friendly-fraud/

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