When faced with excessive chargebacks, a merchant’s cost of doing business increases; those costs are then passed on to consumers in the form of higher prices and shipping charges.
Clearwater, FL (PRWEB) May 28, 2014
The first quarter of 2014 saw eCommerce spending rise 12 percent year-over-year to $56.1 billion, marking the eighteenth consecutive quarter of positive year-over-year growth and the fourteenth consecutive quarter of double-digit growth (1). The steady hike should be a cause for celebration among eCommerce merchants, but many online businesses are finding themselves at a steep financial risk due to an intangible adversary: chargebacks. eConsumerServices, a transaction dispute practice, maintains that the propensity of consumers to contact their bank for an unwarranted refund caused merchants to lose an estimated $11.8 billion dollars in 2012, according to Visa. (2) Rather than becoming dependent upon unjustified chargebacks, eConsumerServices encourages consumers to take a more proactive stance to ensure their financial and credit protection.
Consumers are reportedly choosing to forego the correct avenue of contacting the merchant to settle a transaction dispute, opting instead to contact their bank for a refund—98 percent of consumers who filed for chargebacks from January through March did so without contacting the merchant first. (3) But despite consumers reaching out to their banks in search of an “easy refund,” recent reports say that consumers would fare just as well by contacting the merchant rather than the bank, as merchants are often willing to yield to the customer’s wishes in order to avoid chargeback-related fees from banks, which could run up to $100. (3) In addition to the fees that threaten their business, per Gary Cardone, CEO of eConsumerServices, excessive chargebacks also leave merchants at risk of losing their ability to process cards issued from Visa or MasterCard, effectively ending an online business.
When a chargeback is initiated against a merchant, the customer receives a temporary refund from their bank or credit card company; the merchant is then charged an irreversible fee, plus the entire transaction amount. Cardone says that the imbalance is apparent in that the merchant is automatically ruled guilty and is then forced to provide documentation proving that the transaction was legitimate. But even if the merchant fights the case and wins, they only recover the temporary refund amount, not the associated fee; as a result, increasing chargebacks add increased costs that can drain hard-earned profits, per Cardone.
There are several reasons why a chargeback may be warranted, such as a fraudulent charge or an incidence of double billing; but many consumers are relying on chargebacks as an alternative refund method, costing not only the merchants, but also themselves in the process.
“Consumers are failing to realize that friendly fraud not only presents complications for merchants, but for them, as well,” said Cardone. “When faced with excessive chargebacks, a merchant’s cost of doing business increases; those costs are then passed on to consumers in the form of higher prices and shipping charges.”
As the trend has continued to lean in favor of consumers, many merchants have ceased fighting chargebacks altogether, choosing instead to simply refund the customer without challenge, in order to avoid—at any cost—excessive chargebacks that could put their ability to process at risk, according to a 2013 report by SecureBuy. (3) However, merchants are now beginning to fight back—nearly one-third of merchants are contesting all chargeback claims filed, and 40 percent of those cases are being adjudicated in favor of merchants. (1) This has resulted in an increased number of unhappy customers contacting their bank for answers, making it an increased expense that takes away from profits, per Cardone.
Cardone says that for consumers with legitimate transaction issues, the appropriate avenue is to enlist the assistance of an impartial mediator with sufficient experience to resolve the problem quickly, saving both time and money for every party involved, which in essence protects the backbone of the economy—small to medium-sized businesses navigating the eCommerce market.
eConsumerServices acts much like a “third-party clearinghouse” between consumers, merchants and their banks. With multiple levels and tools, the company resolves transaction inquiries and reduces the threat of frivolous disputes quickly and with finality. This methodology results in a significant cost savings for issuers and acquirers alike, making it less risky for merchants and their consumers, while helping to streamline a very intricate and complex process.
For more information, visit http://www.econsumerservices.com.
eConsumerServices was initially formed in 2009, but was focused overseas in the European market. However, over the last 12 months, eConsumerServices has developed a market in the USA, and is picking up speed. eConsumerServices specializes in promptly resolving consumer problems as they relate to eCommerce purchases. The company was formed after its sister company, Chargebacks911, surveyed 2,100 consumers who had filed chargebacks, discovering that an overwhelming number of merchants’ customers who had filed chargeback disputes had gone to their banks because the merchants didn’t offer a fast and efficient support option. Customers were looking for a place that would resolve their inquiries. eConsumerServices was created to serve such customers. Co-founder Monica Eaton-Cardone established eConsumerServices because she felt that it was important to have one company for merchants and one company for consumers. With this, the issuers would be kept out of the dispute—issuer involvement in disputes leads to higher costs, which eventually affect consumers. eConsumerServices is an online service that acts as a mediator between merchants and consumers in helping to resolve transaction disputes. To learn more about eConsumerServices and its services, visit http://www.econsumerservices.com.
1. McIntyre, Douglas. “E-Commerce Rises 12% in Q1.” 18 May 2014. Web. 20 May 2014. 247wallst.com/retail/2014/05/18/e-commerce-rises-12-in-q1/.
2. “Friendly Fraud? Yes It Exists.” The Christian Science Monitor, 11 Mar. 2014. Web. 03 Apr. 2014. csmonitor.com/Business/Saving-Money/2014/0311/Friendly-fraud-Yes-it-exists.
3. Anand, Priya. “The Sketchy Way Many Shoppers Get Refunds.” MarketWatch. 20 May 2014. Web. 20 May 2014. marketwatch.com/story/asking-for-a-refund-this-is-the-nuclear-option-2014-05-07.
4. brandongaille.com/credit-card-chargeback-process-guide-for-visa-mastercard-and-amex/. July 20, 2013. Web. Feb. 6, 2014.