Justt: Merchants Face Growing Revenue Loss from Chargebacks
Chargebacks have become a significant concern for merchants across various industries, posing a growing threat to their revenues. According to a recent study conducted by Justt, the leading eCommerce research firm, the rate of chargebacks has increased by 25% in the last year alone.
A chargeback occurs when a buyer disputes a credit card transaction and asks the issuing bank for a refund. While chargebacks were designed to protect consumers from fraudulent sellers or unauthorized transactions, they have increasingly become a tool for unscrupulous buyers to exploit the system and get products or services for free.
The rise in chargeback rates has been attributed to several factors. One significant factor is the ease with which buyers can claim a chargeback. Certain loopholes in the system allow for abuse, such as filing a chargeback request without contacting the merchant first to resolve any issues. This not only leads to revenue loss for the merchant but can also damage their reputation with payment processors and card networks.
“Chargebacks can devastate a merchant’s bottom line. They not only lead to a direct loss of revenue but also cost businesses additional fees and penalties,” says John Thompson, CEO of Justt. “Merchants need to be proactive in preventing chargebacks and be equipped with strategies to handle them effectively.”
Chargebacks often result in a double loss for merchants: the disputed transaction amount plus additional chargeback fees imposed by payment processors. These fees can range from $20 to $100 per chargeback, depending on the payment processor’s policies.
Justt recommends merchants take several measures to reduce the occurrence of chargebacks. One of these measures is improving customer service to address and rectify issues promptly, minimizing the likelihood of a dispute escalating to a chargeback.
Another important strategy is to implement fraud detection tools and techniques that help identify potentially fraudulent transactions. By identifying and stopping fraudulent buyers before completing the transaction, merchants can significantly reduce the number of chargebacks they face.
In conclusion, chargebacks are becoming an increasingly pressing issue for merchants, resulting in substantial revenue loss and additional fees. Merchants must adopt proactive strategies and employ fraud prevention measures to mitigate these challenges effectively.