Revealing original research, dispute management specialist Chargebacks911 and independent payments news outlet, Card Not Present (CNP), has outlined the far reaching impact of friendly fraud as a number one cause of chargebacks.
The study encompassed the opinion of over 200 online, multichannel and mobile commerce merchants and revealed the struggle that merchants face when managing chargebacks, particularly as the majority of respondents feel they lose most of their cases.
It detailed that friendly fraud was the number one cause of chargebacks – this is when customers contact their banks for a refund on a purchase they made, without a legitimate reason. More than half (56 per cent) of all respondents reported an increase in the instances of friendly fraud over the past three years.
According to the study, identifying friendly fraud is the most stringent obstacle of a merchants’ chargeback management, with 31 per cent of respondents citing it as the biggest challenge. Disputing chargebacks was listed as a close second at 29 per cent.
In hopes of reducing the number of chargebacks merchants are experiencing, Visa and Mastercard have introduced new rules. However, 82 per cent of merchants surveyed believed that Visa’s Visa Claims Resolution (VCR) had little or no impact on chargeback management. Only 19 per cent of merchants noted a decline in Visa chargebacks after VCR, while over half (55 per cent) said they didn’t believe there was a decline.
Despite the difficulty of managing chargebacks and adhering to new rule changes, most merchants don’t use third-party chargeback management solutions.
Chargebacks911’s COO and co-founder, Monica Eaton-Cardone, explained: “As consumers are becoming increasingly comfortable with the chargeback process, friendly fraud has grown in response. Merchants should therefore have access to the tools needed to be able to combat the issue.
“If we are going to reduce friendly fraud and standardise chargeback management, it’s important that we work together as an industry. Merchants must be aware of the tools that are available to and tackle the issue head on. Merchants don’t have to be victims. There are a variety of tools that prevent chargebacks and challenge disputes.”
To help them reduce chargebacks, Visa released a plug-in called Visa Merchant Purchase Inquiry (VMPI). The tool allows businesses to respond to cardholder inquiries and complaints before a chargeback is instigated and gives issuers more resources with which to respond to chargebacks.