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Chargeback Statistics: What Recent Data Show

Recent chargeback statistics reveal significant annual spikes in rates and costs associated with shifting consumer shopping behavior and fraudulent activity.
February 14, 2018 2 minute read

Chargeback-Statistics-What-Recent-Data-ShowsEvery merchant is wary of chargebacks and how these can affect their business. While it’s nearly impossible to avert them all, merchants are always thinking about what they can do to avoid as many such claims as possible.

For those seeking a better understanding of chargebacks—including why and how they occur—researching the latest chargeback statistics can be a good start.

There’s been an increase in chargebacks due to changes in how consumers shop.

As discussed in a May 2016 article by news journal Women's Wear Daily, consumer behavior has shifted significantly within the past few years:

“And as billions are spent on developing omnichannel retailing, which includes putting the shopper at the center of the retail model, the power of the consumer has shifted,” it states.

As a result, chargebacks have increased.

In fact:

  • The chargeback rate is rising 20 percent each year.
  • Friendly fraud, specifically, increased 41 percent from 2014 to 2016.

Furthermore, chargebacks are costing merchants a lot of money, which could hurt both their bottom lines and reputations among consumers.

Press release distributor PR Newswire reported some findings from the 2017 LexisNexis® True Cost of FraudSM, an annual, comprehensive research study specifically examining fraud within the U.S. retail and online/mobile industries. This year, LexisNexis Risk Solutions surveyed “1,196 risk and fraud executives across retail, eCommerce, financial services and lending organizations" during March to April 2017, the PR Newswire article explains.

Among its findings:

  • In 2017, “every dollar of fraud to merchants and firms in these sectors is estimated to cost $2.66 on average.”
  • The cost amounts to about $3.48 per dollar of fraud (!!) among companies “selling digital goods and / or primarily transacting through remote channels.”
  • “The study also investigates fraud costs as a percentage of revenues, as reported by survey respondents, to be nearly 2 percent (1.90 percent) across retail, e-commerce, financial services and digital lending businesses.”
  • Fraud costs as a percentage of revenues were explored among companies that offer digital goods to consumers and/or “conduct transactions primarily through remote channels,” as well. These businesses experienced an even higher percentage: “2.51 percent of revenues.”
  • But digital merchants who make at least $50 million in annual sales tend to spend more money on fraud costs.

These chargeback statistics exemplify just how much fraud could end up costing merchants. This includes not only chargeback and so-called "friendly fraud," but other types as well.

Consequently, learning more about the measures to take to help prevent chargebacks from occurring is crucial.

Topics: Merchant Processing

For additional information please call MerchantPro Express at 888-333-1374 or email info@merchantproexpress.com.

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