Justt recently released a new report, Customer Attitudes Towards Chargebacks in 2022. The report compiled data from the US and the UK on topics such as the impact of COVID-19 on spending habits, reasons for repudiating a charge, accepted payment methods, and consumer awareness of chargebacks.
Roenen Ben-Ami, Justt’s co-founder and Chief Risk Officer, answered our questions about some the insights the data revealed.
25% of all American cryptocurrency transactions end in a chargeback. How is that possible, given that the money is not being held by a credit card company or bank?
The 25% chargeback rate is for fiat-to-crypto transactions. A large percentage of fiat-to-crypto purchases are made with credit or debit cards, and therefore they can turn into a chargeback. It doesn’t matter where the crypto currency ends up being stored. As long as a credit or debit card was used in the transaction, it can be disputed.
Over 50% of both US and British consumers said a generous returns policy would influence their chargeback decision. What is a reasonable return policy timeframe, and how should companies communicate it to their customers?
More important than the time period of the policy is customer awareness of said policy. The policy should be easily accessible and highlighted in the checkout screen, so that the cardholder is properly advised before they commit to a purchase. The process of returning an item should also be simple and coherent – allowing the cardholder to make a return with little effort.
A reasonable return policy is one that allows the customer sufficient time to receive and assess their purchase. That would usually mean a minimum of 14 days, although what is considered a reasonable or generous return period can vary by geographic market. In the U.S., the standard return period for most goods in most states is 30 days. A generous returns policy in the U.S. would be significantly more than that.
Your report talks about “chargeback activism”. Can you explain what that means, and how merchants can respond to the challenge?
Chargeback activism is the use of chargebacks by consumers to punish a company for implementing policies they disagree with. A blatant example was during the Canadian trucker convoy protest at the start of the year. Anti-vaccination and personal liberty advocates who wished to contribute to the truckers’ protest faced a decision by the donation site GoFundMe that it would not allow donations to protest groups and would refund all the money received at the time of the policy change. Some figures in the movement then suggested that instead of accepting refunds donors should charge back GoFundMe to hit the site with additional chargeback fees and create problems for its credit card processing.
Until Justt’s survey it wasn’t clear how common an occurrence chargeback activism was. Shockingly, we found that 25% of Americans surveyed had filed a chargeback for political or values-based reasons having nothing to do with the items they purchased. An additional 19% had considered doing so. This is simply redefining the consumer-merchant relationship by adding a political component to it. And chargebacks in large numbers are worse than a consumer boycott since they not only lead to lost sales but also additional fees and potentially cut off a merchant’s credit card processing altogether by jacking up their chargeback ratio. That is why we call it chargeback activism. It’s like a consumer boycott but worse.
Merchants really only have two remedies to defeat chargeback activism and they should probably pursue both simultaneously. First, they should use chargeback alert services to proactively refund customers who are in the process of opening a dispute through their bank. This way the merchant can neutralize the impact to their chargeback ratio. Second, they should invest in a chargeback mitigation service that can rapidly scale to meet the larger than expected number of disputes that will come through the system once it is clear that there is a coordinated chargeback campaign going on among a significant share of customers. Merchants can win these chargebacks and keep the money in dispute, thereby discouraging the spread of the tactic to copycats encouraged online and through social media by the success of early proponents of the tactic.
Nearly half of US consumers file chargebacks in the gaming vertical. Why is this problem so acute compared to other verticals like travel or entertainment?
The gaming industry is known to suffer from a serious level of “buyers remorse” on purchases, as games or even elements within games that require micro-purchases fail to meet user expectations. Unlike a vertical like travel, gaming is heavily exposed to family fraud as cardholders often save their payment details on a gaming platform, which are then abused by young family members. This is a frequent occurrence that doesn’t happen with higher ticket items that are typically bought by a more mature audience like airplane tickets.
What is the biggest takeaway merchants can get from reading the new survey?
Chargebacks have become part of the fabric of the payments world, and they are increasing year over year. Accepting credit card disputes as the cost of doing business is becoming an expensive proposition that endangers the health of businesses. Merchants need to take action to be prepared to dispute chargebacks. That means following the guidelines of the card schemes, maintaining good customer service and having a professional chargeback mitigation solution on their side.
Justt has pioneered an innovative and holistic approach for handling chargebacks combining proprietary technology, strong methodological know-how, and advanced personalization.