Written by Jim Luff – Chosen Payments

Have you noticed an uptick in chargebacks? We are seeing many of our merchants who are experiencing chargebacks for the very first time after decades of business experience. As we enter the third month of 2022, our Aurora Payments chargeback assistance team has seen a huge surge in chargebacks. This is a phenomenon taking place throughout the world. In fact, it’s so prevalent that our industry has named it, The Chargeback Surge.

What’s Causing the Surge?

Surprisingly, we believe this is a side effect of the COVID-19 pandemic as the surge rates coincide with life changes that occurred in March of 2020 when our lives shifted in one way or another. The lockdown became a catalyst for digital commerce. From neighborhood restaurants who adapted to online ordering and curbside pickups to retail merchants who quickly embraced internet sales and added eCommerce to their websites. With the surge in eCommerce comes the surge in chargebacks. Americans are spending more time online and in a recent survey, six out of every ten consumers reported making at least two eCommerce purchases per month.

It’s Everywhere

American merchants are not alone in seeing the chargeback surge. Card brands such as Visa and MasterCard report chargeback increases from three continents. 24% of all online shoppers in the United States, Australia and the United Kingdom have filed a dispute against a merchant in the past 12 months. 12% of this same group is initiating chargebacks at least once monthly.

How Big is the Problem?

It’s big! 48% of all merchants in the previously mentioned continents have experienced a 50% increase in chargebacks filed against them in the past 20 months. Every chargeback has a 50% chance of being won or lost by a merchant. If you lose a chargeback, you lose the funds and you are left without the product or the time you spent working on a paid project that you will never get back. Every chargeback defense means someone must gather the supporting documentation and take the time to respond to the chargeback notice and track it to the resolution.

Reasons for Chargebacks

More than 80% of all consumers have shopped online since March 2020. 54% of those shoppers report they are shopping online more than they did before the pandemic began. The online shopping shift includes making more household product purchases. Nearly 25% of those who have shifted to online shopping have disputed at least one charge in the past 12 months. Service errors such as shipping mistakes, billing mishaps or late product arrivals are the most common reason for initiating disputes. In fact, service errors account for the bulk of all chargebacks while only 27% are related to fraudulent activity. Fraud disputes are slightly lower than disputes involving product confusion or misrepresentation which account for 39% of all chargebacks. Perhaps this is because we can’t examine a product ordered online until it arrives. Another increasing reason for chargebacks is known as a “friendly fraud” incident. Kids are also spending more time online and making purchases and placing orders unbeknownst to their parents who then file dispute charges that the purchase of virtual game time was unauthorized. There are more disputes involving friendly fraud than there are of legitimate fraudulent purchases.

Working the System

Consumers have become more educated to initiating chargebacks against merchants when they don’t get their way. A typical example includes a customer wanting to return an item past the return period. When the merchant declines to take the item back, cardholders file disputes. A dispute like this can easily be won in the merchant’s favor with the right messaging posted in-store, on the receipt and on the website. The merchant must prove that the customer was adequately informed of the allowed return period. When customers are told they can’t have a refund and can only have store credit, they file disputes to get their money back. These can be won on a case-by-case basis based upon details.

Always Respond

While chargebacks are disheartening for a merchant to receive, you should respond to each one. Your hard-earned profits are immediately sucked out of your bank account. You have an opportunity to explain your side and gain it back. If you take too long to respond, you could lose the dispute simply for not responding in time. If you fail to respond at all, it can be considered a black mark against your business. Too many unanswered chargeback notices can get your business placed on a blacklist that ensures you will be unable to accept credit cards through any credit card processor.

Aurora Payments provides full support for our merchants battling chargebacks. If you receive a chargeback notice and need help, give us a call. If your Merchant Services Provider doesn’t provide chargeback assistance, make the switch to Aurora Payments. We are a full-service provider that provides White Glove Service™ for our merchants.