CHARGEBACKS
REVENUE LOSSES
Every invalid chargeback filed translates to revenue loss. To illustrate, compare a chargeback to a typical refund:
• With a refund, an equitable exchange occurs.
• The customer returns the merchandise in exchange for their money back.
But a chargeback puts the merchant at a disadvantage. When a cardholder files a dispute, they often fail to return the item( s) purchased. This means the merchant loses out on both inventory and revenue from the sale.
Merchants are also assessed chargeback fees, which range between $ 20 and $ 100 per transaction. Chargeback fees are administrative fees that help banks cover the overhead costs of handling disputes. Merchants are responsible for these charges even if the chargebacks they receive are deemed fraudulent and overturned.
That would be bad enough on its own. But, to add insult to injury, most of the chargebacks that merchants get slapped with will be invalid. Data compiled by Visa estimates that as many as 75 % of all chargebacks filed against merchants are fraudulent.
And, in the last three years, 72 % of merchants surveyed as part of the 2024 Chargeback Field Report say they experienced a rise in invalid disputes. Among them, the average increase stood at 18 %.
In short: we’ re seeing cardholders file more chargebacks, and file them with more reckless abandon than ever before.
CUSTOMER SERVICE COSTS
There are other costs to consider as well. Like the time investment involved in chargeback disputes.
A skilled customer support team can usually resolve customer inquiries within minutes. But a chargeback can take weeks— or even months— to resolve. It can require substantial evidence, time spent waiting for responses, and going through multiple cycles of dispute resolution.
This means merchants must spend considerable resources on personnel, including training, and on their enabling technologies, which come at the expense of running and building up their business.
Resolving these issues when they happen through proactive customer support can increase the chances of retaining the customer and encourage them to contact the merchant first should issues arise, thereby reducing long-term revenue implications. The income from the customer almost always outweighs the expense of outreach.
But methods that can help generate a customer’ s loyalty can only help before a dispute is escalated to a chargeback. Once an issuing bank has filed a chargeback against the merchant, the only potential solutions are to accept the losses or fight back through dispute representment.
Yet even if a merchant subsequently wins and reverses a dispute, the fees are not refunded, and they have most likely lost that customer’ s loyalty. The merchant must eat the overhead spent preparing the response, too; there’ s no compensation for that.
FRAUDSTERS MAY CALL THE CONTACT CENTER PRETENDING TO BE CUSTOMERS TO GATHER DETAILS THAT HELP THEM FILE CHARGEBACKS.
CONTACT CENTER SECURITY CONCERNS Unfortunately, customer service has become a common vector for fraud, including friendly fraud, which can pose security risks for merchants ' contact centers in multiple ways. Here are some key concerns.
Social Engineering and Fraudulent Chargebacks
Fraudsters may call the contact center pretending to be customers to gather details that help them file chargebacks. They might pressure agents into issuing refunds while still intending to dispute the charges through their banks. Skilled social engineers could manipulate agents into disclosing transaction details that make their chargeback claims more convincing.
Account Takeovers( ATOs)
Contact centers are often targeted for account takeover( ATO) fraud. A scammer posing as a legitimate customer might request changes to account details. Weak authentication protocols in customer service( e. g., relying on basic, knowledge-based verification like names and addresses) make this an easy method for fraudsters. Then, the legitimate user files a chargeback once fraud is discovered.
Data Exposure Risks
In poorly secured call centers, sensitive payment details or transaction histories might be accessed by unauthorized parties, including rogue employees or external attackers. Recorded calls containing sensitive payment data( e. g., card numbers, customer IDs) could be a target for cybercriminals if not properly encrypted or stored securely.
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