The Latest Chargeback Stats & Insights Revealed
Chargebacks were first introduced more than four decades ago as a consumer protection mechanism intended to build public confidence in credit cards. Since the rise of eCommerce, though, chargebacks have had unintended consequences—a fact reinforced by the few currently available chargeback stats.
What Do Most Merchants Already Know?
Not much, unfortunately.
There is minimal published information regarding chargebacks and friendly fraud, resulting in a lack of understanding and consensus. It’s hard to compile reliable information on the subject without considerable input from banks, card networks, and merchants.
Issuing banks and card networks refuse to publish essential data or specific numbers on chargebacks such as: dispute win rates. They typically don’t keep the kind of comprehensive records on the subject that would enable a broader view of the matter.
Similarly, merchants tend to keep issues involving chargebacks quiet, fearing that any association with chargebacks could harm their reputations.
Despite the confusion, it’s clear that the problem is getting worse. The longer this situation carries on, the longer merchants will experience lost revenue and threats to their sustainability. That's why we’ve compiled this list of the most significant—and in some cases, shocking—chargeback stats currently available.
Chargebacks Stats Revealed
First, we now know most chargebacks are likely cases of friendly fraud. But at the same time, friendly fraud is not always a deliberate act. The customer often genuinely believes that a chargeback is in order when filing-- making friendly fraud difficult to identify and prevent.
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A recent study by ClearSale shows the most common reasons given for customers to file a chargeback:
Identifying friendly fraud is no simple task. Up-to-date insight into the problem is the key to protecting businesses against developing threat sources.
But while the problems of chargebacks and fraud are complex and difficult to solve, looking at the raw figures can offer some clues as to what’s really going on in the industry. The following chargeback facts and stats paint a stark picture of the current situation with regards to chargebacks, fraud, and the demands of modern, digital-enabled customers:
Chargeback Ratios: The Full Break Down
According to data published by Juniper Research, the global average cost of chargebacks each year is approximately 0.47% of total merchant revenue. That risk, however, is not evenly divided across the board.
The chargeback risk associated with a transaction varies widely based on several factors. For example, ClearSale identifies the following as the six products most at-risk for chargebacks:
The reason is a confluence of multiple risk factors including price, traceability, country of origin, and product category. The data from ClearSale breaks down average chargeback ratios based on the industry in which the merchant operates, as well as the seller’s country of origin:
These figures don’t seem particularly high at first glance. However, most acquirers will restrict or even cancel a merchant’s account if they approach the critical 1% chargeback-to-transaction ratio. If that happens, the merchant will be placed on the MATCH list and deemed ineligible for a standard merchant account.
In context, this gives merchants very little wiggle room between the “average” number of chargebacks and a number that might destroy their business.
Facts: The Key to Fighting Friendly Fraud
Though the available data is limited, it clearly shows how eCommerce has radically impacted the role chargebacks play in the payments industry.
Taking a genuine stand against friendly fraud requires education. In turn, education requires more comprehensive facts and data to create a better model of the payments industry and truly understand the needs of merchants.
Do you have insights, chargeback stats, or additional data not published here? Interested in sharing your information to help win the battle against friendly fraud? Email marketing[at]chargebacks911.com.