Right about now, merchants will be experiencing the damaging effects of the chargeback lag. Typically, 60 to 90 days after bouts of high traffic, chargebacks begin to creep in. It’s not until well after the initial sale that merchants can really say whether the intense and impulsive sales period was worth it for them. As such, at this time of year, merchants tend to look back on Black Friday and Christmas with regret… But they’re the first ones signed up when the next big sales day hits. So how do you eradicate false economies and truly benefit from sales? Let’s take a look.
Cut unnecessary costs
The unwelcome necessity of outgoings will never be eradicated (we’re sorry to say), but we can marginalise chargeback expenses so they’re no longer a “cost of doing business”. Unfortunately, those safeguarding the industry have made little attempt to fight chargebacks and friendly fraud. Attention is lavished on other fraud patterns which are being addressed more effectively than ever before. However, the biggest threat to merchants isn’t fraudsters, it’s consumers growing accustomed to fraudulent behaviours; and we’re calling for an end to it.
The customer is not always right
This may sound controversial but modern shoppers arguably have too much control when shopping online. Consumers are increasingly denying their own transactions, causing a whole chain of events that ultimately end up eating away at a merchant’s bottom line. Friendly fraud now accounts for as much as 70% or more of all credit card fraud occurring today – this is unacceptable. Denied transactions leave merchants refunding the purchase, paying processing fees and losing the disputed goods.
The fraud landscape doesn’t look attractive: 47% of merchants believe that fraud is inevitable. Even though chargeback fraud has risen alongside consumer demand to shop remotely and anonymously, the industry is only just waking up to the problem. But with makeshift solutions that can’t deliver a genuine chargeback management proposition, 58% of merchants still find themselves unable to even identify what disputes are fraudulent, never mind how to prevent them.
A problem for payments
When it comes to resolving disputes, regardless of whether you’re an issuer or acquirer; getting to the crux of the issue is key. This doesn’t happen without a deep understanding and first-hand experience of the components that interact. Currently, consumer banks are obliged under the Payment Services Directive to apply an immediate same-day refund when they are notified that a transaction is unauthorised – this causes the balance to tip further into the consumers’ favour. To stop this partiality, banks need to be fully reviewing consumer activity and open up the conversation with them to spot who is genuinely unhappy and who’s trying to win a quick buck.
Holiday spirit aside, consumers tend to act more maliciously than ever during peak sales days in their desperation to save money amid the fear of missing out. When chargebacks hit, merchants need to present compelling evidence to the consumer’s bank to prove that they held up their side of the bargain. By monitoring suspicious activity, merchants can save themselves a lot of time and resources come-February once a dispute has been raised.
Changing behaviours inside-out
An industry-wide change needs to happen. Issuers can’t go on automatically refunding consumers and hitting merchants without investigating consumer behaviour. While we fight for a change in mindset across the payment world, there are a number of things merchants can do to reduce invalid chargebacks by as much as 40%. This can be as simple as checking product descriptions and website functionality – you’d be surprised at how unclear, slow services turn friendly customers into ‘friendly’ fraudsters.
Once merchants are aware of how they can reduce both genuine and fraudulent chargebacks, and issuers start accommodating merchant demand for justice, they can be free to dive into peak sales days without fear of losing out to disputes months after the event. Until then, we’ll remain sceptical about Black Friday bringing the retail boost merchants chase each year.
To find out more information about how merchants can protect themselves to fully relish in the benefits of peak sales days, check out our latest white paper: Are Seasonal Sales Really Worth It? A lesson learnt for retailers, or go to www.thechargebackcompany.com.
About Monica Eaton-Cardone
Monica Eaton-Cardone is an international entrepreneur who provides sustainable revenue retention and risk reduction solutions to the ecommerce environment. She is the co-founder and COO of The Chargeback Company, known as Chargebacks911 outside Europe.
About The Chargeback Company
The Chargeback Company, known as Chargebacks911 outside Europe, provides comprehensive and highly scalable solutions for chargeback compliance, handling services and fraud strategy management. The company helps decrease the negative impact of chargebacks, thereby increasing revenue retention to help ensure sustainable growth for every member of the payment channel.
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