By Dawn Minnaar
South Africa Country Manager
Chargeback claims have reached record levels and are expected to increase at a rate of 41% every two years. Causes for this increase in credit card charge disputes include the rise of e-commerce, supply chain issues and delivery problems during and in the aftermath of the pandemic, as well as the increased leverage customers have on social media and review sites.
The rise of chargeback claims may cause problems for merchants, issuing banks and customers. Although supply and delivery issues give rise to legitimate chargeback claims, eight out of 10 merchants believe that chargeback fraud is eating up their revenues. Issuing banks are dealing with challenges faced by the steep rise in these chargeback claims by being more selective regarding which claims they accept.
Customers will bear the brunt of these higher standards and may find even legitimate chargeback claims thrown out or if they go through the process, they may be less likely to achieve a successful result than in the past.
Therefore, fund recovery success depends on having professionals bolster your case and act as an advocate. MyChargeBack gives guidance to consumers who are trying to recover their funds from merchant disputes, forex scams, or other types of fraud. Talk to MyChargeBack professionals and get started on fund recovery.
What Are Chargebacks?
A chargeback is a reversal of charges on a credit card. It begins with a complaint and a chargeback request issued by the customer. The bank that issues the credit card will decide whether the chargeback request will be accepted or declined.
A claim that is not filed in the correct category or one that lacks evidence will usually sent back to the customer. It is important to read the issuing bank rules for chargeback procedures carefully before filing a claim to ensure it isn’t immediately rejected.
The chargeback process provides an opportunity to the merchant to respond to the cardholder’s claims. If they do, the issuing bank decides whether to accept the customer’s version of events or the merchant’s. Given the increase in chargeback complaints, issuing banks are becoming more selective about which cases they will hear and when to grant a chargeback. Therefore, anyone making a chargeback claim should be prepared to provide thorough evidence to back up their complaint.
Top Reasons for the Increase in Chargeback Claims
The following factors have contributed the to rapid growth in chargeback complaints:
- The rise in e-commerce
- Supply chain issues
- Delivery delays
- Friendly fraud
- Consumer leverage
One reason for the increase in chargeback complaints is that there are more online transactions. This was a steadily increasing trend prior to the pandemic, although there is no doubt that lockdowns caused by COVID-19 played a significant role. When physical stores were closed people moved online to do their regular shopping.
According to Forbes, the pandemic advanced e-commerce growth by four to six years. Those who had been using cash or physical cards in brick and mortar stores were purchasing online during the pandemic, and this trend is expected to continue.
As a result, customers often rush to buy products without looking thoroughly at the item and regret the purchase afterwards. Or they may engage in impulse buying, which can tempt them to make a chargeback claim even though they fully consented to the transaction and there is nothing really wrong with the product.
In addition, the higher the number of transactions, the more likely erroneous charges may appear or other mistakes that can lead to a chargeback claim.
Some merchants acknowledge that the increase in chargeback claims is not only caused by customers, but also by supply chain issues and inefficient delivery. Labor shortages have increased as countries emerge from the pandemic.
People are either unable or reluctant to fill job openings, and as a result, items may be out of stock or not delivered on time. Customers are not prepared to tolerate this and are likely to file a chargeback claim if they don’t receive the right item by the promised delivery date.
However, many merchants also blame customers for the increase in chargebacks. There is no doubt that customers have more leverage than ever before. If someone doesn’t like an item they purchased or are dissatisfied with a service, they simply go onto a review website and leave a bad report or publicise the issue on social media.
Even a one-time problem can damage a company’s reputation if it is publicised widely enough. This puts merchants in a position of making refunds, or not disputing chargeback claims in the name of good service and retaining customer loyalty. However, there is rising discontent among merchants who feel that chargebacks are eating into their bottom line.
Added to this problem is the incidence of ‘friendly fraud,’ in which a customer is acting in bad faith and demanding chargebacks even for items they have used and intend to keep. Chargeback fraud is the 21st-century form of shoplifting and eight out of 10 merchants feel that this ‘friendly fraud’ has increased and poses a serious problem for their businesses.
How Merchants and Issuing Banks Are Dealing with Increased Chargebacks
To deal with the rising tide of chargebacks, issuing banks are more selective about which complaints they will pursue. Merchants are using automated tools such as Justt to reject many of these chargeback claims, and there is a concern that issuing banks will also automate their processes to deal with the overload.
If this happens, the human element may be taken out of the chargeback process, at least in the initial phase, and more consumers can see their requests thrown out by bots or by issuing banks that just want to reduce their workload.
If a chargeback case is accepted, customers will be asked to provide solid evidence in a way that will persuade the issuing bank. To succeed in the chargeback process, a fund recovery service is a decisive factor that can help customers retrieve their funds.
If you are seeking a chargeback from a credit card or bank wire purchase, it is important to seek guidance immediately. Consult with MyChargeBack experts and provide information that can help you prepare your claim. We have an extensive working knowledge and relationship with banks and can improve our prospects for fund recovery success.