By raising awareness and educating consumers on the costs and repercussions of chargebacks, we hope to encourage them to follow the proper procedures for credit card disputes and help minimize friendly fraud.
Tampa Bay, FL (PRWEB) June 01, 2015
Current chargeback trends reveal that 20% of credit card chargebacks are attributable to criminal fraud, 10% to merchant error and 70% to “friendly fraud,” in which consumers dispute a legitimate transaction to avoid financial responsibility.(1) Beyond the value of the disputed order, friendly fraud costs time and resources to respond to the charges and incurs chargeback fees that can be upwards of $50 per transaction. As online merchants and banks seek to recoup these chargeback-related expenses, eConsumerServices predicts the costs will be passed down to consumers. However, the transaction dispute mediator warns that rising prices and fees can create a backlash among unhappy consumers, who may be more likely to shop at competing merchants or switch to a different credit card provider.
While the chargeback process was instituted as a form of consumer protection, an eConsumerServices survey found that chargebacks are often abused due to a misunderstanding over how the process works. Four out of five survey respondents admitted they filed a chargeback because they felt it was more convenient and less time-consuming than contacting the merchant, and nearly half said they were unaware their bank inquiry resulted in a chargeback.(2) When a chargeback is issued, merchants not only lose the order value, merchandise and shipping costs, but they are also typically assessed a bank fee. While the fee can vary, eConsumerServices has found it is usually a minimum of $50 per chargeback.
Given the high cost of chargebacks, many retailers resort to price increases to recoup their losses—which means the expense eventually trickles back down to consumers. When a merchant successfully challenges a chargeback, the cost of the disputed transaction falls to the bank or the consumer. If consumers incur the cost, they may blame the bank for not covering the loss. But if the credit card provider absorbs the cost, it may resurface in the form of increased fees or a higher annual percentage rate (APR)—which can also create unhappy consumers. Therefore, merchants and banks have to determine the right balance between recouping their chargeback expenses and keeping their customers happy.
“Chargebacks were meant to be a last-resort option for credit card disputes when the consumer could not achieve a satisfactory resolution from the merchant. But ever since consumers began using chargebacks as their default method for obtaining a refund, it has resulted in increased costs for all parties involved—merchants, banks and consumers alike,” explained Gary Cardone, CEO of eConsumerServices. “By raising awareness and educating consumers on the costs and repercussions of chargebacks, we hope to encourage them to follow the proper procedures for credit card disputes and help minimize friendly fraud.”
To illustrate the potential costs of chargebacks on the industry as a whole, Cardone points out the potential cumulative expense of chargeback fees if every U.S. credit cardholder were to initiate just one chargeback per year. A Federal Reserve Bank survey found that 72.1% of Americans hold one or more credit cards (3); based on 2013 Census Bureau estimates of the U.S. adult population (4), that amounts to over 175 million cardholders. When that figure is multiplied by an estimated $50 chargeback fee, the total exceeds $8.75 billion in fees alone, not counting merchandise and shipping losses.
Cardone acknowledges that these estimates are purely hypothetical, since there are currently no definitive chargeback statistics available, but he contends that they demonstrate the significant financial losses that must be covered by merchants, banks and consumers. “It’s easy for customers be lulled into thinking that an occasional chargeback is just a drop in a very large bucket. But considering the sheer volume of online transactions and the growing number of serial chargeback filings, those costs add up quickly—and they impact all parties in one form or another,” he cautioned. “The simplest way to reduce these costs is for consumers to work directly with the merchant or a transaction dispute mediator to achieve resolution, and to avoid filing chargebacks unless there is no other recourse.”
eConsumerServices can help consumers quickly obtain a refund or exchange without resorting to costly chargebacks or experiencing lengthy wait times. Individuals can complete and submit the online claim form in less than five minutes, and eConsumerServices often facilitates refunds in a matter of hours—whereas the typical chargeback can take 60 days to investigate and process. The service is free for transactions made through eConsumerServices-endorsed merchants; for all other claims, consumers only pay a modest $2 fee if the process takes longer than 24 hours. When consumers do their part to minimize chargebacks and merchants and banks implement effective chargeback management, Cardone says these measures can help all parties reduce their overall costs.
To learn more about eConsumerServices and its transaction mediation services for consumers and merchants, visit http://www.econsumerservices.com.
About Global Risk Technologies and eConsumerServices:
Global Risk Technologies is most known for its role in payment processing solutions that cater to each side of the value chain: Chargebacks911.com and eConsumerServices.com. The firm is headquartered in Tampa Bay, Florida, with offices in Ireland and Atlanta. They have approximately 350 employees worldwide, and currently manage over 150MM in transactions each month, with clients located in the U.S. and Europe.
eConsumerServices focuses on the cardholder or consumer in order to encourage transactional resolution before it progresses to a chargeback. The company caters to the B2C (business-to-consumer) sector of Global’s initiative, in working to realize greater standardization and increased efficiency within the payments industry. eConsumerServices is an online mediation service that works to effectively and efficiently resolve transaction issues between merchants, consumers and banks. For more information, visit http://www.eConsumerServices.com.
1. Global Risk Technologies. “Chargeback Triggers” under “Chargeback Remediation”; accessed May 21, 2015. globalrisktechnologies.com/chargeback-remediation
2. Eaton-Cardone, Monica. “eCommerce Imbalance: Encouraging Increased Chargebacks, Friendly Fraud”; Transaction World; April 2014. transactionworld.net/articles/2014/april/chargebacks.html
3. Schuh, Scott and Joanna Stavins, Federal Reserve Bank of Boston. The 2011 and 2012 Surveys of Consumer Payment Choice; September 29, 2014. bostonfed.org/economic/rdr/2014/rdr1401.pdf
4. U.S. Census Bureau. Calculations based on 2013 population statistics in USA QuickFacts; last revised April 29, 2015. quickfacts.census.gov/qfd/states/00000.html