News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud


How the Holiday Season Intensifies Chargeback Problems

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[Editor’s Note: December is Chargebacks Month on (sponsored by Chargebacks911). Chargebacks are an ever-present headache for digital merchants. Rules set by the card networks to govern them are complicated and favor consumers and issuers, often leaving merchants feeling frustrated. Check back here throughout the month for updated content aimed at helping merchants understand, manage and respond to chargebacks.]

Holiday Sales Look Good in December, but May Lead to a Flood of Chargebacks in the New Year

Great sales numbers mean higher profits, but what looks like booming business in November and December can very easily turn into a mountain of chargebacks in January and February.

Chargebacks are an ongoing issue, one that merchants must contend with all year. At the same time, many of the most common chargeback triggers are made worse by the events leading up to the holiday season:

Express Orders

Holiday sales usually come with a deadline. Customers want their order by a specific date, and for that reason, many retailers offer express shipping at no additional cost this time of year. This benefits legitimate customers, who may procrastinate or simply wait for the lowest price, but the situation works great for fraudsters, too.

Fraudsters are usually in a hurry to get their illegally ordered merchandise. They know the faster they receive their order, the quicker they can disappear, and the harder it will be to track or recover goods once the fraud is discovered.

Chargeback Lag

The time factor can work for fraudsters the other way as well. Ironically, the hectic pace of the holidays often provides a longer window of time before cardholders notice discrepancies. With so much going on, the average person finds it easy to get lax about carefully checking statements. Many opt to put off scrutiny until the new year, when things calm down.

Once customers do discover illegitimate charges, of course, they’re likely to file chargebacks. However, weeks may go by before that happens. Because of this so-called “chargeback lag,” merchants won’t get the full picture on chargeback issues until two or three months into the new year…which is exactly what fraudsters count on.

Global Sales

The internet has changed the way people shop. Shopping online is not only easy and convenient, it allows consumers to compare prices from retailers around the globe. With a virtual world of merchants at their fingertips, shoppers can find exactly what they want, in the color, size and price range they’re looking for.

It’s a great situation for customers, but fraudsters know how to make the most of it, as well. Criminals from any corner of the globe can place orders through a host of different devices, and they know that the increased sales traffic during the holidays can mask their activity. Most likely armed with stolen card information, they’ll buy as much as they can get away with, knowing full well that the consequences will fall squarely on merchants’ shoulders.

Sales Volume

As we noted, fraudsters find it easier to slip faux purchases through during the holiday buying season due to the sheer number of orders that merchants are dealing with. It’s understandable: merchants’ minds are less on potential fraud and more on “striking while the iron is hot.” Again, criminals understand this and do their best to take advantage of the situation.

Special Considerations for 2017

In addition to the factors that have historically driven a seasonal increase in chargeback activity, certain details seem to be having a particularly significant effect this season.

Gift Cards

Merchant-branded gift cards make great holiday presents, but virtual gift cards and e-gifting are emerging as a problem area due to their very high rate of attempted fraud.

Fraudsters love the intangibility of virtual gift cards and e-gifts, as they are very easy to resell or convert into cash. And the huge number of legitimate e-gift card orders during the holidays creates a perfect smokescreen for hiding their fraudulent activity.

EMV Implementation

An increasing number of retailers have migrated to EMV “chip” cards over the past year. Due to the enhanced POS verification of this newer technology, EMV card readers make it much more difficult to commit card-present fraud.

But while EMV technology provides higher fraud prevention barriers, fraudsters have simply changed their tactics and started concentrating more of their efforts on CNP purchases. Without the physical chip to verify the cardholder, fraudsters can pretend to be anyone.

In-Store Pickup

More and more brick-and-mortar retailers like Wal-Mart, Target, and Staples are pushing “buy online and pick up in store” offers as an advantage they have over online-only giants like Amazon. Consumers like in-store pickup, as they are not forced to pay shipping costs; because of this, in-store pickup fraud is predicted to jump by nearly 30 percent.

Fraudsters love in-store pickup, too, as it eliminates the need for a delivery address. By making a fraudulent transaction online, then simply walking into the store and collecting their order, fraudsters get away with merchandise before in-store or online systems flag the order as potentially fraudulent. Like many of the other schemes we’ve discussed here, the criminal counts on the high sales traffic of the season to make merchants hurried and careless.


In 2014, mobile accounted for 11.6 percent of annual U.S. e-commerce, or some $303 billion in sales. By 2020, forecasters say, mobile will make up nearly half of the nation’s projected $632 billion in online transactions. Unfortunately, m-commerce merchants are experiencing a surge of fraud attempts, as well, with a success rate of over 65 percent.

Combine that with the rapid acceptance of mobile as a viable shopping platform, and the likelihood of record-breaking fraud and chargebacks is practically guaranteed.

Chargebacks are Just One of Many Holiday Risks

For merchants, chargeback fraud is an ongoing issue. The holidays add extra elements—more sales volume, looser verification practices, and more—that make chargebacks an even bigger concern. If you’re worried about your ability to mitigate the impact of fraud during the peak post-holiday season, it may be time to call in outside assistance.

To learn more about ways your chargeback rate can be affected by the holidays, be sure to download The eRetailer’s Guide to Holiday Chargebacks. This new book gives you the exclusive insights and information you need to protect your bottom line—all for free!

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