Let’s face it – no merchant wants to be hit with a chargeback. Not only can a chargeback put a merchant out of money, but can also be a lengthy and complicated process. Chargebacks occur when a consumer disputes specific charges from their account and are ultimately protected from receiving responsibility for the charge. Recently, merchants have been hit by a plethora of chargebacks, causing damage to some businesses.
What is causing this rise of chargebacks? Experts feel EMV has played a role in this trend. Since the rollout of EMV, many merchants who lack EMV-capable equipment have become overwhelmed with an increase of chargebacks. If a chip card is swiped at a non-compliant terminal, the merchant is held fully responsible in the instance of a fraudulent or a non-fraudulent chargeback.
Another issue is that not all EMV-capable terminals currently have the applicable EMV certification and software ready and installed. This has caused a rise in friendly fraud instances, where a consumer can initiate a chargeback against a merchant as their terminal was not EMV-ready and could not process their chip card with EMV.
Interestingly enough, women are responsible for more chargebacks than men. When dealing with online purchases, women were held accountable for 76% of online chargebacks. Experts found that with regarding online sales, women tend to be pickier than men with the purchases they receive and were more apt to ask for a refund on a product.
“If a company caters to a female-dominant demographic, they should proactively plan for chargebacks,” said Monica Eaton-Cardone, co-founder of Chargebacks 911. “This means using ultra-precise language when describing products, posting up-to-date images from various angles, investing in high-end customer service, and creating a clear and transparent refund policy.”
However, not all chargebacks are a result of a fraudulent transaction, and friendly fraud is the perfect example. In fact, over 75% of chargebacks are a result of friendly fraud – most instances occurring online. Many times consumers will commit friendly fraud and dispute charges related to the following:
- The consumer didn’t receive the item on time
- The consumer never received the item they purchased
- The consumer felt the service or item was misrepresented of what was offered
- The consumer received the product but deliberately disputes the charge to get it for free
"Friendly fraud happens when you as a consumer make a purchase, where nobody saw you in person -- over the phone or online -- and you received the merchandise or the service, and then you got a refund from your bank," said Eaton-Cardone.
Regardless of the friendly fraud situation, the merchant is the one held liable for not only the cost of the product, but also for shipment costs as well as chargeback fees. Visa revealed that friendly fraud causes an estimated $11.8 billion in losses and is one of the main e-commerce threats behind phishing scams.
Since chargebacks can be a costly endeavor to handle, those merchants who experience a chargeback should handle it quickly and begin the claim process as soon as possible. Merchants who wait around could end up being issued the chargeback, ultimately resulting in a loss of revenue.
Chargebacks are unfortunately a situation merchants of all sizes could be faced with. The emergence of EMV technology brought on an increase of chargebacks due to a lack of EMV-capable solutions and necessary software. Friendly fraud incidences have also spiked,. All in all, merchants who do experience a chargeback should take the necessary steps to handle it as soon as possible to prevent further damage and revenue loss for their business.