Merchants: Chargeback Management Trends for 2021
Over the past year, we have seen a dramatic increase in the number of consumers buying online. That is good news for eCommerce companies and anyone selling goods or services online. Analysts expect consumers to spend more than $933 billion on eCommerce in 2021, accounting for a nearly 18% jump above spending levels in 2021.
Along with that increased spending comes an increase in criminal fraud and chargebacks. Juniper Research puts the value of losses from eCommerce fraud in 2021 at $20 billion, also an 18% increase from 2020.
Chargebacks are trending up as well. A merchant survey by Atomik Research on behalf of Kount, an Experian company, reported that 58% of merchants say they have seen an increase in chargeback rates since March 2020. Nearly half of those surveyed estimate their current chargeback rate is between 0.6% and 1%. A third of companies say their chargeback rates are greater than 1%, and another 7% say chargeback rates are more than 2%.
Increasing Cost of Fraud
Fraud costs are rising for companies as well. Every dollar of fraud now costs companies more than $3.60, according to the LexisNexis True Cost of Fraud study. That is a 7% increase from last year and a 15% increase since pre-COVID times.
Trends in Credit Card Fraud
Increased online activity emboldens criminals and provides an increased opportunity to use stolen credit cards, freely traded on the dark web.
In 2021, three trends are emerging:
- Buy online, pick up in store (BOPIS) fraud attempts
- Synthetic identify fraud
- Fraud as a Service (FaaS)
BOPIS fraud attempts were up more than 50% in 2020, often with buyers needing to provide only an online receipt or code to pick up goods. Industry watchers are expecting this trend to continue this year.
Synthetic identify fraud is also on the rise. With synthetic identity fraud, thieves use legitimate consumer information to create fake identities. For example, they might use a real person’s Social Security number and tie it to a fake name, address, and phone number.
Over time, this false identity can be used to create an online profile to try to establish a legitimate credential. Per the Federal Reserve, synthetic identity fraud is the fastest-growing financial crime.
Cybercriminals are also getting more sophisticated and organized in the way they are attacking merchants. Fraud as a Service (FaaS) encompasses online platforms providing anyone with access to the online tools and data they need to commit online fraud. FaaS operates like a legitimate business on the dark web and even provides classes on how to conduct fraud. With FaaS, you can hire anonymous hackers to commit fraud for you.
Credit card fraud prevention is more important than ever.
Trends in Chargeback Management
When stolen credit cards are used, it naturally results in chargebacks as consumers dispute fraudulent purchases.
Chargeback management is an increasingly sore spot for companies. In 2021, three trends have emerged:
- Increased chargebacks due to delivery problems
- Repeat offenders
- Fewer chargebacks are being disputed
One of the biggest reasons consumers use as the reason for initiating chargebacks is a delay in delivery. Because of increased shipping due to supply chain disruptions and slower processing by delivery services, 45% of retailers say delivery delays have increased their chargebacks. Contactless delivery is also playing are role as merchants are often unable to confirm package delivery.
About half of cardholders who successfully commit friendly fraud become repeat offenders. Merchants are noticing repeat chargebacks from nearly 50% of card users within two months.
Just a third of companies say they dispute every chargeback in 2021. Six out of 10 merchants say they dispute some chargebacks, while 5% do not dispute any. Many online merchants say they do not want to spend the time and expense of dealing with chargeback management when the average net recovery rate is only 12%.
Some retailers acknowledge they do not have the resources to differentiate between fraud, friendly fraud, and legitimate chargebacks.
Credit Card Fraud Protection
Perhaps the most frightening aspect to all of this is that the fraud attacks are unrelenting. The average retailer in the U.S. now sees 1,740 fraud attempts every month — and nearly half are successful.
With new threats emerging and the frequency of threats increasing, credit card fraud protection requires increased vigilance and additional tools for prevention.
Command Credit provides a variety of credit fraud protection solutions to identify and prevent fraud and chargebacks. For more information, visit CommandCredit.net today.