Annual Chargeback Report & Statistics

October 7, 2020

This is the first in a four-part series taking an in-depth look at payment disputes in 2020. Here are the topics covered in the report:

This report does not have to be read in order, so feel free to jump ahead to other topics that pique your interest.

Introduction

Data-driven decisions enable pragmatic and practical solutions to be applied to unique problems. Mitigating payment disputes is possible now more than ever, thanks to the sheer amount of information available for interpretation.

Overview

Here are the most important conclusions provided by this report:

Between 2018 and 2019, there has been a 20.6% decrease in the average chargeback-to-transaction ratio. Merchants continue to be encouraged to develop a broad chargeback prevention strategy with the express goal of curtailing revenue loss, costs and penalties.

A decrease in lag-time has resulted in a 75.54% increase year-over-year in the incidence of chargeback filing and processing (with a turnaround time of one week) between 2018 and 2019. Real-time chargeback management platforms can aid in solving disputes faster while reducing the rates of occurrence.

Friendly fraud has become a much more difficult charge to fight as a merchant. According to Midigator, it “happens when a cardholder uses the chargeback process incorrectly, either as an intentional attempt to get something for free or an innocent misunderstanding.” Investing in verification tools that compile compelling evidence on the merchant’s behalf can curb ‘friendly fraud.’

Utilizing technology to strategize chargeback prevention is the greatest tool at a merchant’s discretion.

Chargeback Ratio

The chargeback-to-transaction ratio has dropped a total of 31.1% since 2017. While payment disputes remain a large concern for merchants, there is a noticeable year-to-year decrease as they work more proactively to mitigate risk.

Chargeback-to-Transaction Ratio by Card Brand

Chargeback-by-Transaction Ratio

Percent of Revenue Lost to Chargebacks

There is no one “cost” associated to each chargeback. Every dispute cost varies because of several key factors: lost processing fees, chargeback fines, labor costs for management, and much more. A more accurate gauge of the financial impact of chargebacks can be measured in revenue loss.

Chargeback revenue loss decreased 18.5% between 2018 and 2019, owing to an overall reduction of 42.3% in three years. The drop shows a relative relationship in decrease to the chargeback-to-transaction ratio.

While guarding against all risk is impossible, merchants with well-advised plans and forethought are far more likely to recover lost revenue and protect their bottom line

Revenue Lost to Chargebacks

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