How Subscription Services Lead to an Increase in Dispute Volume

Nov 16, 2022

With an estimated 200% growth from 2022 to 2026, subscription services have become a major revenue stream in eCommerce. Consumers pay an average of $219 on subscriptions each month and manage an average of 12 subscriptions in the media and entertainment categories alone. Data from a survey conducted by C+R Research about consumers’ relationships with these subscription services gives us important insights into how they constitute a perfect breeding ground for first party and/or family fraud.

➡️ On average, consumers underestimate their monthly spend on subscriptions by $ 133 – 2.5x more than their original estimate
➡️ 74% say it’s easy to forget about recurring monthly subscription service charges
➡️ 42% have forgotten about a recurring monthly subscription(s) they were still paying for but no longer using
➡️ 72% responded yes when asked if they set all of their monthly subscriptions to “auto-pay”
➡️ Mobile phone, internet, and TV/Movie streaming were the top three most forgotten types of subscriptions

First party and family fraud are the major drivers behind chargebacks in the subscription economy. First party fraud happens when a cardholder initiates a dispute over a legitimate transaction they made and forgot about, whereas with family fraud, a household member performed a transaction without the cardholder’s knowledge. In the case of subscription services, having payment options stored through connected devices makes it a convenient purchase experience for consumers, but for the same reason, these purchases are also easier to lose track of. Risks of first party and/or family fraud are especially high with yearly rather than monthly subscription plans because the charges are much more noticeable once they auto-renew.

Accounting for as high as 70% of all credit card fraud, first party fraud cost the industry over $132 billion in 2020 alone. According to Mastercard, issuers and merchants incur $15-70 in operational costs for every dispute.

Help us spread the word! Share this article and contribute to a wider conversation. 📚💬

To minimize the operational costs of submitting unjustified chargebacks and handling the somewhat likely objections from the acquiring bank, it is important to help the cardholder remember the transaction, in case of first party fraud indicators:
▶ Previous, undisputed purchases with the same merchant
▶ Card on file transactions

By design, our fraud recovery & chargeback solution, Amiko, considers all aspects of the chargeback process:
▶ Cardholder self-service with transaction recognition skill to prevent first party and family fraud
▶ Bi-directional communication channel between the fraud & dispute team and the cardholder to collect cardholder feedbacks or documents
▶ Bulk case creation and dispute submission and many other automation features

Amiko integrates with the latest industry solutions (Ethoca and Verifi) to offer the best experience and capabilities to issuers.

Related articles:

How Subscription Services Lead to an Increase in Dispute Volume

Discussion about this post