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Chargeback and friendly fraud at crisis levels for retailers

Credit card chargeback is reaching crisis levels for retailers on both sides of the Atlantic, according to a survey of US and UK consumers.

Two-thirds of US shoppers and 44% of British shoppers have filed chargebacks in the past 12 months, and many have filed multiple chargebacks — part of a global trend that is eating into retailers’ revenues and damaging customer relationships.

The Justt Customer Attitudes Towards Chargebacks survey shows that both UK and US consumers now routinely rely on chargebacks to vent dissatisfaction with the products and services they receive.

American shoppers were markedly more aggressive than British consumers in their use of chargebacks across all industry verticals, and were also more likely to file serial chargebacks, with 15% of respondents filing five or more disputes in the past year.

In the UK, about one in 10 shoppers filed three or more over the past 12 months.

Some industries are especially vulnerable, with half of US respondents saying they had filed a chargeback for online or mobile game purchases.

COVID-related disruptions also impacted the travel and entertainment industry, with 36% of US consumers and 16% of UK shoppers saying they had used them to dispute travel and entertainment-related purchases.

Moreover, consumers in both countries are also increasingly engaging in chargeback activism, with a remarkable 44% of US consumers saying they had used or considered using them to punish companies whose values differed from their own.

New payment technologies have only fuelled the “friendly fraud” problem, the survey found, with more than 6 out of 10 US consumers who use buy now, pay later (BNPL) services saying they had used refunds or chargebacks to reverse BNPL transactions over the past 12 months.

Crypto also has a problem, with a quarter of US crypto buyers filing chargebacks.

How can retailers respond to the threat of friendly fraud?

55% of customers stated that a generous returns policy would make them less likely to pursue a chargeback. In the UK, 60% said the same.

But the survey makes clear that returns policies and customer service alone aren’t the solution: companies also need a comprehensive and scalable solution to help them manage chargebacks and file accurate disputes in a timely manner.

Both American and British consumers see credit card chargebacks as an important consumer protection, with 52% of Brits and 47% of US consumers saying they actively choose to pay by credit card for high-risk purchases.

“This survey shows that consumers on both sides of the Atlantic increasingly see chargebacks as simply part and parcel of the retail process — a protection they’re entitled to avail themselves of if they feel in any way disappointed by their shopping experience,” says Roenen Ben-Ami, Justt co-founder and Chief Risk Officer.

“With new retail practices and payment technologies only exacerbating the chargeback problem, retailers urgently need to find a scalable and effective mitigation solution to help them effectively manage transaction disputes.”


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