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Digital Identity, Security & Online Fraud

Verifi releases report on the damaging effects of chargebacks

Tuesday 15 May 2018 | 12:50 PM CET

Verifi has issued a new report that highlights the urgent need for collaboration between merchants, issuing banks and consumers to fight chargebacks.

The report, entitled “The Chargeback Triangle” and commissioned with Javelin Strategy & Research, found that consumer disputes and chargebacks created USD 31 billion in financial losses in 2017, with merchants bearing nearly USD 19 billion of the costs and issuing banks incurring the remaining USD 12 billion.

Among key findings, the report shows that consumers reduce purchase behaviour with a merchant by as much as 62% following a chargeback – and nearly two-thirds of consumers are more cautious about patronizing merchants similar to the one with which the dispute occurred.

Moreover, when the resolution process is drawn out, blame tends to shift toward the issuer that stands to lose top-of-wallet status and possible loss of consumer. Also, consumers largely call the bank to initiate a dispute. Assessing friendly fraud risk can be a challenge for issuers, and both merchants and issuers agree that it has become too easy for consumers to dispute transactions.

Chargebacks can be prevented more than 80% of the time when the consumer contacts the merchant first with a dispute. For every dollar in a disputed transaction, merchants and issuers incur an additional USD 1.50 in costs, including technology, personnel, and external resources.

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