Chargebacks survey sheds light on CNP fraud

A recently released survey conducted jointly by Kount Inc. and Chargebacks911 assessed the state of fraud and chargeback management in more than 1,000 organizations. Titled the 2018 State of Chargebacks Survey, the study revealed card-not-present (CNP) fraud to be the number one source of chargebacks for 48 percent of businesses surveyed, followed by friendly fraud for 28 percent.

"Chargebacks within the CNP channel are a growing concern among online merchants," said Brad Wiskirchen, CEO of Kount. "This inaugural report was important for the industry to understand the state of the market today, the current challenges that merchants face, and the fraud technology and tactics that they are deploying to combat chargebacks."

Particularly hard hit by CNP fraud were merchants in the travel/entertainment/leisure and education/training sectors, where 60 percent of respondents cited CNP transactions as the primary source of chargebacks. Additionally, researchers found significant differences in regional chargeback distribution. For example, more than 20 percent of merchants doing business in Western Europe reported that the majority of their chargebacks originate in that same region, compared to 11 percent of organizations overall; 39 percent of organizations operating in Asia indicated the bulk of their chargebacks are originating from the United States versus 16 percent who said most of their chargebacks are coming from Asia.

Mixed outcomes for organizations

The survey also found that while 82 percent of merchants actively dispute chargebacks, just 47 percent have been able to maintain a chargeback rate below 0.5 percent, the stated target for 70 percent of those surveyed. More than a third of respondents who fight chargebacks win less than 30 percent of dispute cases; one-fifth win less than 15 percent.

Among those surveyed, 40 percent of organizations engaged in the financial services and education/training sectors realized chargeback rates in excess of 1 percent. Merchants selling digital goods and services experienced higher chargeback rates as well.

Posting the lowest chargeback rates were businesses involved in the event ticketing, apparel/accessories/jewelry, home/kitchen/pets/toys and travel/entertainment/leisure industry categories. At least half of these organizations reported chargeback rates of 0.5 percent or less. Reducing chargeback rates was a priority for 50 percent of the organizations surveyed.

Fighting back

Eight-eight percent of respondents currently deploy multiple tools or services to combat fraud and chargebacks. Following are the most commonly used fraud fighting techniques cited by organizations surveyed:

• Address Verification Services (AVS) – 62 percent
• Card Verification Value (CVV) – 62 percent
• Disputing or representing chargebacks – 42 percent
• Email verification – 42 percent
• Decline/negative lists – 38 percent
• Velocity limits – 37 percent
• Phone number verification/reverse lookup – 31 percent

The full report is available for download at info.kount.com/white-paper/state-of-chargebacks-2018 .

Editorial Note:

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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