The Current State of Chargebacks for Issuers
As we dive deeper into 2023, the landscape of cardholder disputes continues to evolve, presenting both challenges and opportunities for issuing banks. According to the latest Chargeback Field Report, the current environment demands a proactive approach to mitigate the impact of increasing chargebacks and changing cardholder behaviour. Let's take a closer look at the facts from an Issuing bank’s perspective:
Rising Chargebacks: With an average estimated increase of 19 percent in chargebacks received this year, issuing banks find themselves at the forefront of a significant operational challenge. As cardholders become more aware of their rights within the dispute process, it's crucial for banks to anticipate and adapt to this volume.
Shifting Cardholder Behavior: On average, cardholders contested six transactions within a year, with the majority falling within the $25-75 range. Cardholders are increasingly recognizing the efficacy of the dispute process in their favour. This empowerment is prompting more individuals to leverage chargebacks as a means of addressing discrepancies and concerns.
Friendly Fraud Prevalence: Merchants estimate that 44% of chargebacks stem from friendly fraud, emphasising the importance of distinguishing legitimate disputes from illegitimate claims. Issuing banks should strike a balance between supporting genuine grievances and curbing fraudulent activities.
Bypassing Merchant Contact: Surprisingly, over 50% of cardholders admitted to filing bank chargebacks without attempting to contact the merchant. Issuing banks should bridge this communication gap, encouraging direct merchant-cardholder interactions before initiating chargeback procedures. Moreover, Issuers can leverage merchant collaboration solutions such as Verifi or Ethoca.
Financial Toll: Mastercard forecasts chargeback-related losses to reach a staggering $117.46 billion in 2023. Efficiently handling disputes and minimising illegitimate chargebacks becomes a vital financial imperative.
Clear Billing Descriptors: Ambiguous descriptions may lead cardholders to inquire about unfamiliar charges, inadvertently escalating to chargebacks. Issuing banks can collaborate with merchants to enhance transaction clarity and minimize disputes.
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