As Chargebacks Rise for Merchants, ISOs Respond
In recent years, chargebacks have not only become a huge problem for merchants, but ISOs are also feeling the effects. Monica Eaton, the COO of Chargebacks 911, was featured in ISO & Agent, discussing the impacts of chargebacks on businesses’ bottom lines. She also commented on what online merchants and ISOs are doing to mitigate the risks.
Historically, ecommerce merchants viewed chargebacks as just a cost of doing business. Eaton states,
"It's requiring a lot more attention. It's no longer just a routine error on merchants' balance statements"
However, as the volume of online transactions has been increasing at an exponential rate, so has the level of chargebacks. This has resulted in online merchants seeing chargebacks negatively impacting their bottom line to a greater extent, therefore forcing them to acknowledge the problem.
“E-commerce sales have more than doubled in the past five years, from $144.9 billion in 2009 to more than $304.9 billion in 2014, according to the U.S. Commerce Department. But at the same time, online-only merchants are experiencing more fraud losses because they are being held liable for a greater proportion of chargebacks, according to the LexisNexis® Risk Solutions True Cost of Fraud Study.
The increase in chargebacks is due to the increase in online transactions, but also in line with the trend of fraudulent chargebacks. Consumers have been filing illegitimate chargebacks, attributing to the huge losses merchants have seen.
“Large e-commerce merchants lost 1.39% of their revenues to fraud in 2015, compared to 0.6% of their revenues in 2012.”
As well as ecommerce merchants acknowledging the growing issue of chargebacks, ISOs are stepping up to take responsibility also. They are reviewing and improving chargeback regulations and guidelines enforced on merchants.
“ISOs are paying much closer attention to chargeback thresholds and using more scrutiny when bringing on e-commerce merchants. For some ISOs, part of the underwriting process now involves ensuring that when boarding an e-commerce merchant, there's a 24/7 customer service support center available to them.”
To attempt to combat the solution of rising fraudulent chargebacks on merchants, ISOs have also turned to third party chargeback specialists, companies like Chargebacks911.
