May 22, 2018
Merchants and issuers combined lost around $31 billion to chargebacks in 2017, with merchants bearing around two-thirds of the losses ($19 billion), according to a new report. The Chargeback Triangle, a report from Javelin Strategy & Research commissioned by Los Angeles-based dispute resolution solution provider Verifi, also found that financial loss is not the only way merchants suffer. Following a chargeback, the study found consumers decreased their spending with the merchant in question by about 62 percent.
While liability accounts for most of the cost borne by issuers, chargeback costs for merchants are associated more with managing the process than with the liability for stolen goods, the report said.
“While issuers generally do not require any evidence besides a cardholder’s assertion to charge back a transaction, merchants bear a significantly greater logistical burden,” the authors wrote in the report. “Before the merchant can even determine which chargebacks it has a reasonable chance at representing, it must assess the transaction’s legitimacy in the limited time provided by the chargeback dispute process. Consequently, 60 percent of merchants’ chargeback-related costs arise from chargeback management expenditures, rather than from liability.”
For both merchants and issuers the costs of managing the chargeback process involve more than simple liability. For every dollar in disputed transactions, merchants and issuers spend an additional $1.50 in fees, management expenses and personnel costs.
Visit Verifi’s Website to download a free copy of the report.