Chargeback Statistics That High-Risk Merchants Should Know

Nothing is more frustrating for a high-risk merchant than a steady stream of chargebacks each month. Aside from the long process of filing a dispute to protect your bottom line, chargebacks could also hurt your credibility and even put your merchant account at risk for being terminated by your merchant provider.

The first step to avoiding a chargeback is knowing what you can about it starting with these important chargeback statistics:

The damage caused by friendly fraud

Friendly fraud is the most common reason behind a chargeback. This type of fraud happens when a customer files a chargeback for an otherwise legitimate transaction.

A lot of these fraudsters do this to get their money back for a product that they already used. Some wouldn’t even return the product even if they claimed that it was damaged or didn’t meet their expectations.

According to a study conducted by ClearSale, 86% of all chargebacks can be traced back to friendly fraud. It also revealed that a merchant loses at least 1.47% of its total revenue because of friendly fraud chargebacks.

The most common causes of chargebacks

Aside from friendly fraud, the same study also revealed the most common reasons people file for legitimate chargebacks against merchants:

  • 30% said that their stolen credit card was used to make a purchase
  • 26% said that their card was charged for a product that was never delivered to them
  • 15% said that they received the wrong product
  • 4% said that the product they bought didn’t meet their expectations
  • 4% said that the product they received was different than what was described on the website
  • 3% said that the product they ordered had clerical errors or was billed to their credit card twice

The customer’s behavior

The ClearSale study also revealed that some of the reasons for chargebacks are due to customer behavior:

  • 81% of customers think that filing for a chargeback is a more convenient option than asking for a return. Most of these customers either don’t know how this impacts businesses or they simple don’t care.
  • Only 1 in 20 customers will get in touch with a merchant to complain about an issue with their order. This means that the remaining 19 customers are at a high risk for filing a chargeback instead of negotiating with the merchant.
  • 1 successful chargeback filed by a customer will most likely result to nine other chargeback complaints from the same customer in the future.
  • 40% of customers who filed for a chargeback will likely file another one within the next 60 days.

As a merchant, it’s essential to know how to avoid these chargebacks and dispute them to protect your business. The good news is; most of these reasons are preventable if you have the right measures in place.

Aside from making sure that you are reachable by your customers, you also need to set clear terms and conditions on your website and make sure that your product descriptions are accurate to avoid these complaints in the future.

References:

https://www.investopedia.com/terms/c/chargeback.asp

https://www.firstcardpayments.com/chargeback-statistics

Read more: Customer’s Favorite: 6 New Flowers To Greet Someone With Positivity

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