Eye-opening report commissioned by Verifi illustrates US$31 (A$41) billion chargeback problem facing consumers, merchants & issuing banks
SYDNEY– May 15, 2018 – Verifi, today announces a new report that highlights the urgent need for collaboration between merchants, issuing banks and consumers. This in-depth analysis brings to focus the alarming scope and lasting effects that disputes and chargebacks can have throughout the card payments ecosystem.
The Javelin Strategy & Research report, commissioned on behalf of Verifi, examines the root causes of disputes; exploring how consumer behaviour changes based on experiences in the dispute process, and the immediate, lasting, and significant impact on merchants and issuers. The report found that consumer disputes and chargebacks created US$31 (A$41) billion in financial losses in 2017, with merchants bearing nearly US$19 (A$25) billion of the costs and issuing banks incurring the remaining US$12 (A$16) billion.
Entitled “The Chargeback Triangle,” the 36-page report provides a comprehensive view of the present chargeback lifecycle, as well as a detailed breakdown of the significant chargeback costs and negative impacts to issuers and merchants. Most importantly, the report helps reveal opportunities to streamline the dispute process, and – in some cases – how to avoid chargebacks altogether.
Key findings include:
- Consumers reduce their purchase behaviour with a merchant by as much as 62 per cent following a chargeback – and nearly two-thirds of consumers are more cautious about patronising merchants similar to the one with which the dispute occurred.
- When the resolution process is drawn out, blame tends to shift toward the issuer – who stands to lose top-of-wallet status and possible loss of customer.
- Consumers largely call their bank to initiate a dispute. Assessing friendly fraud risk can be a challenge for issuers, and both merchants and issuers agree that it has become too easy for consumers to dispute transactions.
- Chargebacks can be prevented more than 80 per cent of the time when the consumer contacts the merchant first with a dispute.
- For every dollar in a disputed transaction, merchants and issuers incur an additional US$1.50 (A$2) in costs, including technology, personnel, and external resources.
Matthew Katz, CEO at Verifi, stated: “Some of the findings can be hard to accept, but the report validates that the innovation and services we provide are needed to help reduce the high and unnecessary costs that disputes and chargebacks create for all parties in the payments chain. The report clearly indicates that collaboration between issuers, merchants and consumers is critical to resolve disputes effectively and avoid the direct and extended costs that chargebacks and consumer-initiated “friendly fraud” cause for merchants and issuers alike. In the end, the consumer pays the price in the form of higher purchase prices as well so it’s in everyone’s interest to keep these costs down.”
Click here to obtain the research report, “The Chargeback Triangle.”
Founded in 2005, Verifi is an award-winning provider of end-to-end payment protection and management solutions. Verifi’s proprietary collaboration platform services, Cardholder Dispute Resolution Network (“CDRN”) and Order Insight, enable the sharing of near real-time data between cardholders, merchants, and issuers to resolve disputes, save sales, prevent fraud and stop chargebacks. With an APAC headquarters in Melbourne, Australia, Verifi serves more than 20,000 accounts globally. Since their founding, Verifi have developed industry-leading solutions that are trusted by a wide range of businesses, from emerging companies to the Fortune 500. For more information, visit: au.verifi.com.