The share of American and British consumers who have filed at least one chargeback in the past 12 months has increased significantly, according to annual survey data from the 2023 Justt Customer Attitudes Towards Chargebacks report. Meanwhile, in specific verticals like travel and gaming, Americans use of chargebacks has declined from its Covid-era peaks, while British chargeback usage has actually increased and surpassed that of Americans.
What is going on? It’s not entirely clear from the past two years’ worth of data. The data doesn’t overwhelmingly support any obvious hypothesis. Hopefully, next year’s results will provide trends that can easily be deciphered. The leading suspect is, first and foremost, the increasing customer awareness of consumer rights as chargebacks became more commonplace during the Covid-19 pandemic. Additional potential causes are supply chain difficulties hurting customer satisfaction and an economic downturn motivating customers to recoup funds by any means available. However, the sharp rise of British consumer chargebacks relative to U.S. ones is not convincingly explained by any of these reasons, as elucidated below. There are probably a variety of underlying causes that together are responsible for the eye-popping U.K. results.
Notable chargeback statistics
Several data points stuck out in the 2023 Justt Customer Attitudes Towards Chargebacks report that are worth highlighting:
- Overall chargeback usage is up across the U.S. and U.K and is relatively even across both countries: The number of respondents reporting filing at least one chargeback in the past 12 months rose significantly rose 12 percentage points to 78% in the U.S., while in the U.K. it jumped 32 percentage points to 77% among those surveyed.
- Serial chargeback users are becoming a significant problem in the U.K: British serial chargeback activity (6+ chargebacks in past 12 months) spiked drastically. Whereas the 2022 survey depicted serial chargeback users in the U.K. as nearly nonexistent (3% of respondents), that share jumped to 28% this year. Such an aggressive trend reversal is surprising, especially considering that serial chargeback use in America decreased from 18% to 12%.
- Gaming and travel chargebacks are way up for Brits: The share of Brits who reported gaming and travel chargebacks more than doubled. Some 49% of U.K. respondents filed a gaming-related dispute, compared with the 21% noted in 2022. And 36% of Brits reported a travel chargeback in 2023, up from 16% depicted last year. Americans this past year actually were less likely than British consumers to file gaming and travel chargebacks (36% for gaming and 20% for travel).
- Weaponized chargebacks: Politically motivated chargeback use by Brits increased year-over-year. The Justt survey asked if users filed a chargeback due to a disagreement with company values or policies, even if they had no problems with the product itself. The number of U.K. consumers who said “yes” increased by 10 points to 18% of those surveyed. That is a noteworthy increase, especially considering American responses to the same question dropped 10 percentage points to 15%. All this occurred over the course of several consumer boycotts in the U.S. of products related to LGBTQ issues, such as Budweiser and Target.
Are American and British consumers similar?
Last year, Justt’s consumer survey data showed results in line with the conventional wisdom in the payments industry. British consumers were more patient than their American counterparts in waiting to receive goods (82% vs. 76% willing to wait at least 4-5 days for delivery), more likely to request a refund before pursuing a chargeback (70% vs. 63%) and less likely to file a chargeback (45% vs. 66%).
This year’s data shows that British and Americans consumers aren’t all that different. British consumers file chargebacks at more or less the same rate as Americans (77% vs. 78%). They now request refunds before filing chargebacks less frequently than Americans (52% vs. 64%). However, they are still more patient when it comes to waiting for the delivery of goods (79% vs. 73% willing to wait at least 4-5 days for delivery).
Crucial to point out is that the broader survey statistics that reflect the consumer experience and customer satisfaction writ large dropped uniformly year over year in the U.K., while in the U.S. the change was mixed with some figures worsening, some improving and others stable.
Something is going on in the U.K. in terms of consumer experience that warrants further research.
Even in the area of Buy Now Pay Later (BNPL), where the U.K. performed much better than the U.S. in terms of consumer experience in 2022, things have turned on their head. Only 42% of British consumers reported using BNPL payments in the past year without having to resort to a refund or chargeback, compared with 61% in the 2022 survey. By way of contrast, 56% of Americans reported using BNPL without resorting to refunds or chargebacks in the 2023 survey, compared with 32% in 2022.
What is going on in the U.K.?
What is not going on in the U.K.
While we can’t be certain what has propelled chargeback rates to new heights in the U.K. this year, we can rule out several factors. One difference between the UK survey in 2023 and the one in 2022 is the gender distribution of respondents. In 2022, was 41% male and 59% female. While in 2023, the gender distribution more closely reflected the actual gender distribution in the wider population, with 49% male and 51% female.
While it is certainly possible that men have a greater propensity to file for chargebacks than women, the 8 percent gender difference cannot explain the 32 point gap between the U.K. chargeback frequency in 2022 compared with 2023.
Similarly, the 2022 UK survey had a greater proportion of younger respondents than did the 2023 survey, with 52% below the age of 35, compared with 39% below the age of 35 in 2023. However, the gap in the U.K. chargeback frequency in 2022 compared with 2023 is still much larger than the change in age distribution.
Consequently, while it would be interesting to measure the correlation between demographics and chargeback frequency, it’s probably not driving the year over year change in chargeback rates.
Supply chain difficulties appear to be the leading cause of chargebacks in the U.K., being responsible for 27% of them over the past 12 months according to Justt’s survey. However, that’s a 17 point drop from 2022, when supply chain snafus due to Covid and a lack of truck drivers really took a huge toll of the market. The drop means that this reason cannot explain the 32 point jump in chargeback frequency in one year. Supply chain difficulties have eased while chargebacks have not.
It would be tempting to blame the increase in chargebacks on the poor economic outlook over the past 12 months. However, U.K. and U.S. survey respondents’ answers were nearly identical with respect to whether they would use chargebacks as a way to deal with price inflation. Some 10% of Americans said they would rely on chargebacks to counteract the effects of inflation compared with 11% of Brits. In addition, 20% of both Americans and Brits said they would use a combination of caution when purchasing goods, utilize return policies on goods not needed and proactively file chargebacks to recoup money spent as a way of dealing with inflation. The nearly identical numbers may capture why the percentage of individuals using chargebacks rose in both the U.S. and the U.K. over the past year, but it does not explain the massive growth in people using chargebacks in the U.K. relative to the U.S.
Conclusions for Merchants
While clear reasons why will only become evident in hindsight, the share of the population using chargebacks is clearly increasing significantly in the U.S. and especially the U.K.
In the case of U.K. merchants, the data implies that a renewed focus on customer experience is called for. Things that need to be improved include delivery fulfillment and Buy Now, Pay Later payment options.
At the same time, merchants in the U.K. need to shore up defenses against first party misuse (AKA friendly fraud), as the drastic increase in serial chargeback users in one year from incredibly low levels strongly suggests that a significant segment of people are abusing the system.
In both the U.S. and the U.K., greater education on the function of the chargeback system would be helpful as no more than a third of respondents in either country understand that by filing a chargeback they are essentially penalizing merchants.
This article was contributed by Ronen Shnidman from Justt