Are chargebacks negatively affecting your business? Unfortunately, they do have a history of doing that when not managed properly.
Thankfully, a lot has changed over the years and merchants have more protection and systems in place to prevent chargebacks from happening. However, more and more people are shopping or paying for a service online increasing the risk of fraud and chargebacks.
So, are they actually getting better? Let’s take a look at how they are used and how you can mitigate the risks.
What is a chargeback?
Chargebacks were first and foremost implemented to protect the consumer in the use of credit cards from merchant error, merchant fraud and criminal fraud. If a consumer isn’t happy with the service or product received or didn’t authorise the payment, they can raise a dispute with their bank. If the bank deems the claim to be valid, the chargeback process will begin to claim the consumer’s money back.
The rise in chargebacks
As e-commerce grew and grew with online sales drastically increasing by 21.3% back in 2016, the use of credit cards increased, and therefore, the amount of chargebacks, also known as friendly fraud, was on the rise too. In fact, a study has shown that the cost of chargebacks will exceed a huge $100 billion in 2023.
Since the main purpose of chargebacks is to protect the consumer, merchants were left unprotected, posing a serious threat to the merchant’s revenue. Doesn’t seem fair, right? Of course, genuine claims deserve to be paid, but what about those who have found a loophole in the process and are abusing the system?
Who’s at risk?
Any merchant who accepts payments online is at risk of credit card chargebacks. In fact, it has been found that merchants lose an average of $3.75 for every $1 lost to chargebacks due to the added fees.
E-commerce was hit with a huge loss of $20 billion globally in 2021 because of criminal fraud. Therefore, since 80% of chargebacks are fraud-related, it can be argued that e-commerce merchants are affected the most, especially those that sell clothing, high-end merchandise, furniture and easily resalable products.
But it’s card-not-present merchants that are hit the hardest due to the nature of the transaction. The lack of physical contact makes it much easier for the consumer to commit friendly fraud.
What can you do?
So, consumers are protected, but where’s the protection for merchants? You may be wondering, ‘can a chargeback be reversed?’ or ‘can a merchant dispute a chargeback?’. You’ll be happy to hear that a chargeback can be disputed if the merchant can provide evidence against the claim.
Failing that, there are tools out there to help you reduce the amount of chargebacks you receive. With Total Processing, our Total Defender tool comes complete with chargeback alerts. This means you’ll receive an early warning for any chargebacks coming your way so you’ll have time to refund the customer instead, reducing the amount of costs that chargebacks incur.
Get in touch today to see how Total Defender can help your business and provide you with chargeback protection.
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