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Education
Why ignoring chargebacks is dangerous
In addition, ignoring chargebacks incurs significant
disadvantages. Here are three:
1. Increase in fraud level: Fraudsters will repeatedly
victimize merchants who ignore chargebacks – three
to four times, on average.
2. Lower customer retention rate: Up to 30 percent of
chargebacks are born from merchant error. You can bet
a tenfold (or greater) number of customers experienced
the same issues as those who filed chargebacks, but
didn't file chargebacks or contact customer support.
Chargeback analytics They simply walked away and decided not to return.
3. Higher transaction decline rate: Merchants
can turbo charge your ignoring chargebacks provide no incentive to issuers
to approve transactions. Ignoring chargebacks
might indicate admission of guilt from the issuer's
business What chargeback analysis tells us
perspective and lead to blacklisting merchants.
By Suresh Dakshina Working with rich data, chargeback analytics can help
Chargeback Gurus improve all functions of an organization, including
operations, marketing, sales, finance, customer support,
commerce sales are on the rise. According to fulfillment and manufacturing. Here are key chargeback
Digital Commerce magazine, businesses saw an analytics you can benefit from:
estimated 15 percent rise in online transactions
E in 2018. This poses new competitive challenges 1. Chargeback analysis by fraud type
to the ecommerce world. The growth in ecommerce has
increased the cost per acquisition (CPA) for all online Chargeback fraud types can be broken down into
retailers. true fraud and friendly fraud. True fraud chargebacks
happen when the cardholder is not aware of the
Due to rising costs of operations and customer acquisition, transaction and did not authorize it, usually meaning
ecommerce businesses must identify new ways to increase the credit card was compromised. Friendly fraud
their return on investment. Businesses are reporting happens when a valid transaction that was properly
operations cost increases of up to 12 percent due to authorized is disputed by the cardholder either out of
fraud, chargebacks and purchase returns. To score big ignorance or out of a deliberate attempt to defraud the
in the ecommerce world, it's essential to run a tight ship. merchant.
That means having full control over marketing, sales,
operations, fulfillment and customer service departments. True fraud rates exceeding 10 percent can be detrimental
to any business and will continue to escalate if ignored,
The benefits of chargeback analytics since fraudsters operate on networks and tend to attack
the same merchants multiple times before moving on.
When it comes to making changes that yield unequivocal We have seen an increase of up to 20 percent within a
beneficial results, chargeback analytics are among the short span of time in cases where the merchant ignored
least known strategies and some of the lowest-hanging chargebacks. If a merchant using a fraud prevention
fruit. Companies that engage in chargeback analysis and tool still faces more than 5 percent chargebacks, it
then make operational improvements not only increase might be time to re-evaluate the tool or to optimize the
sales, but they also typically improve customer retention security settings.
rate.
Friendly fraud chargebacks are on the rise. Customers
If you are selling a product or service in a highly have high expectations for their card-not-present
competitive space, chances are most of your competitors transactions, and merchants who fail to meet those
are considering chargebacks merely as a cost of doing expectations face a high number of friendly fraud
business. This represents an opportunity for ecommerce chargebacks: 60 to 85 percent of chargebacks normally
businesses to use the rich data chargebacks provide to fall into this category. A rise in friendly fraud
understand their customers better; improve business chargebacks could be due to vulnerabilities in customer
processes and customers' journeys; and use competitive service, fulfillment and marketing departments.
overtures to make more sales, increase profits and
strengthen customer loyalty
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