How Can More Than Eight Out of Ten Chargebacks be Friendly Fraud? Here's How.
Let’s take a closer look at this stat and see how the numbers break down.
What is “The Chargeback Spectrum”?
Before we can really dive-in, it’s important to understand the three fundamental chargeback sources:
However, determining the source of a chargeback is not always so clear-cut. In many cases, you could say that there is one main dispute source, which in turn, triggers a secondary source that causes the chargeback. It’s relatively uncommon that any case will be only merchant error or only cyber shoplifting.
We can call this the “chargeback spectrum.”
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On one extreme end of this spectrum, we have deliberate merchant fraud; the merchant takes a customer’s money, then fails to provide the goods or services promised. On the other extreme, we have cyber shoplifting; the customer makes a purchase knowing that they plan to file a chargeback to try and get something for free.
Merchant fraud chargebacks can obviously be controlled by changing merchant behavior. Then, you could fight back and win against cyber shoplifting through the representment process. But as mentioned before, most chargebacks aren’t on either end of this spectrum…they fall somewhere in the middle:
Looking at most of those chargebacks in the middle, we can see that both the customer AND the merchant share some the responsibility. The disputes in that middle-ground all result from a combination of simple merchant errors and oversights, plus customers who misinterpret industry policy and procedure.
For example, let’s assume you run a shoe store that sells products online. A customer purchases a pair of shoes from you and requests two-day delivery. But, for a combination of reasons, you end up shipping the product out several days late. The shoes don’t arrive by the agreed-upon date, but instead of contacting you about the order, the customer files a chargeback to recover their funds.
Now, the customer is essentially getting those shoes for free. That’s not fair…but it also wouldn’t have happened if you had shipped them out on time.
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Here at Chargebacks911®, we say 86% of the average merchant’s chargebacks SHOULD BE the product of friendly fraud, because most criminal fraud and merchant error chargebacks are preventable. Once you eliminate those chargebacks, you can fight back against the ones you can’t prevent.
You could see chargebacks disappear…with the right tools and strategies at your disposal.
Stop Chargebacks at the Source
Each of the three chargeback sources requires different tools and strategies to address:
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