Why Merchants Shouldn’t File Chargeback Fraud

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Whether it’s chargeback fraud aud or criminal, a high number of chargebacks can damage the reputation of e-commerce businesses. In fact, some merchants don’t even bother to fight a significant portion of chargebacks – leaving $15 billion dollars unrecovered each year1.

While some fraudulent cases may be difficult to distinguish, there are plenty of legitimate reasons for customers to file a chargeback. These reasons may seem harmless, but they can still result in financial losses for the business, including charges and fees from the card provider, lost inventory and time spent resolving each dispute.

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In a typical case of friendly fraud, the customer contacts their card issuer with a false, wrong or exaggerated reason to dispute a purchase. The card issuer then alerts the acquiring bank, who passes along the dispute to the merchant. The merchant is given the opportunity to defend themselves with proof that the product or service was delivered as promised, but many do not take the opportunity.

Fighting a chargeback can cost the merchant money in the form of lost sales and inventory; charges, fees or penalties from the card providers; and operational costs from dedicated fraud departments or participating in a fraud monitoring programme. But it can also cost the business valuable time, which could have been better spent on attracting and growing their audience.

While some chargebacks are not worth disputing, others can be defended with the help of an expert. The right anti-fraud partner can make this process simple and cost-effective, allowing merchants to save time and focus on preventing future chargebacks.

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