Research: Chargeback Challenges And What To Do About Them

May 22, 2024

Chargebacks are without a doubt one of the biggest obstacles merchants have to navigate in today’s payment world.

To shine a light into this growing problem, Riskified, in partnership with Paladin Fraud, released Chargeback Challenges and What You Can Do About Them: Global Insights 2024, a survey featuring over 300 e-commerce chargeback managers and industry professionals.

The survey notes that “significant” and “avoidable” revenue losses for merchants in an economically unstable time means many are fighting
for the survival of their businesses.

As we have previously covered in a previous blog post, chargebacks are a necessary tool to protect consumers, however, in recent times, this tool has been used in nefarious ways, exploited by some consumers to get unjustified refunds on products or services correctly rendered, making this a huge loss for businesses everywhere.

Ushering New Change

· Chargebacks are on the rise with 76% of CB managers seeing as many or more CBs year over year.

· Merchants are electing to let revenues slide, with nearly 60% leaving at least two in five CBs undisputed.

· Reversal of sale is just the tip of the iceberg – 55% of merchants find that their current CB management process is too time-consuming, complex, and manual, adding to cost drivers and profit erosion.

· ‘Friendly fraud’ is a key part of the problem, with more than 73% saying that at least 20% of their CBs are first-party fraud, making it trickier to dispute.

· Over 65% of merchants want AI and automation for some or all of the CB management process to help recover more revenue and increase efficiency.

· Chargeback claims started trending upward during the COVID pandemic, as online shopping boomed and customers looked to recoup funds without leaving the house or having to navigate merchant customer service.

The pandemic saw a surge in these fraudulent claims, however, it has not stopped as Covid-19 dissipated from collective memory: merchants often have to rely on manual processes, technical and data silos and bureaucratic nightmares which lead to the processes being slow and challenging, as well as expensive.

This leads to over half of surveyed merchants to consider the correct chargeback management process to be too time-consuming.

With the influx of chargebacks, operations teams are very likely to miss the most important dispute candidates, such as first-party fraud which accounts for at least one-fifth of chargebacks, because of limited time, bandwidth, or easy access to data and evidence.

Room For Improvement

merchants relize they have room for improvement when it comes to dealing with these issues, in order to recover revenue and
increase their efficiency: 65% consider the use of automation and AI could have a possitive impact, and 32% would like to consolidate
platforms and manage these chargebacks from one centralized platform.

According to Chielf Marketing Officer at Riskified, Jeff Otto, many merchants are unaware of the technological advances that can offer
an opportunity to recover.

One thing is for sure: Merchants consider chargeback operations to be too complex and require too much manual labor for the sheer amount of chargebacks they are facing, making the want to make use of AI to combat them completely understandable.

Want to learn more? Check out Payments Cards and Mobile’s full write-up here.

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