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Friendly Fire: Chargeback Fraud Has Become a Consumer Weapon

Consumers have weaponized chargebacks through chargeback fraud. Convenient access to easily granted charge repudiations has opened the door to purposeful friendly fraud. As a result, a growing field of users now abuse the chargeback process - a system meant to protect consumers - to sidestep the refund process and engage in cyber shoplifting. It is a critical problem for merchants, as first-party credit card misuse now equates to an estimated $125 billion in yearly losses.     

Recent survey data compiled by Justt in our Customer Attitudes Towards Chargebacks in 2022 report has illuminated the exact extent of such unchecked chargeback abuse across the U.S. and U.K. markets. Several insights in particular show how friendly fraud chargebacks have become a weapon for personal gain. 

The following statistics will alarm each and every merchant.


The Rise of Rampant Serial Chargeback Offenders

First, the data shows that a select cohort of consumers engages in aggressive, repeated chargeback claims. Of surveyed Americans, nearly 15% stated they filed five or more disputes in the past year, and around 6% have initiated a massive 11+ claims in the same time frame. While still a minority group, serial chargeback abuse is an obvious threat to merchant profitability and does not bode well for the payments industry. 

While known reasons for repudiated credit card charges may be at fault (e.g. merchant error, customer forgetfulness, issues with global shipments), the egregious number of disputes from repeat offenders calls into question the intent behind each claim. In all likelihood, this active minority group is aware of how chargeback consumer protections slant the system in their favor and willingly engages in fraud.

The cause for such intentional card misuse is partly due to card issuer policies that back consumer claims by default. Chargeback abusers exploit the available loophole as false claims go unquestioned. 

On the merchant side, a failure or inability to fight fraudulent chargebacks contributes to the problem. The more often serial offenders file false claims with zero repercussions, the more likely they will use a chargeback again.     


The Use of Chargeback Activism To Exert Political Pressure 

Second, a stunning 44% of U.S. consumers state they consider chargebacks a legitimate form of political pressure. While vocal disagreements with company values are to be expected between businesses and a certain portion of their customers, consumers who use chargebacks to express political sentiments operate with the clear intent to inflict harm. 

Chargeback activism is now another weapon a consumer can utilize. Moreover, the data shows that a large share of consumers will readily take advantage of such a tool to cripple honest merchants who do not align with their views. Around 25% of Americans said they filed a chargeback because they disagreed with a company’s values, and an additional 19% said they considered doing so even when they had no issue with the quality of goods or services purchased. 

No matter the benefits of political discourse, it should not come at the expense of merchants who create a safe payment environment and transact products in good faith.     


The Use of Chargeback Fraud To Alleviate Buyer’s Remorse

Third,  the data shows that customers engage in purposeful chargeback abuse to recoup losses when dissatisfied with a product. While consumers can certainly express displeasure for any received goods and services, misusing chargebacks to alleviate buyer’s remorse on legitimate purchases is a form of fraud. 

For example, within the United States gaming industry vertical, 23% of American consumers filed a chargeback in the past because the “product/service wasn’t as expected.” In addition, 21% of consumers filed a chargeback simply to cancel an unwanted recurring transaction, and 38% of respondents stated they threatened to file a chargeback because of a recurring bill they no longer wanted. 

The data shows that disgruntled customers will leverage the chargeback process for personal gain. Instead of canceling or sourcing refunds through the appropriate customer service channels, many consumers choose to weaponize chargebacks.  

A probable cause of such fraudulent actions is the perceived convenience of filing a chargeback, as the hassle of returns outweighs the ease of making a false claim.   


How the Payment Industry Can Defend Against Weaponized Chargebacks 

Short of considerable reform to the entire chargeback process, the following considerations can help merchants and the wider eCommerce payments ecosystem address the continued use inappropriate use of chargebacks:  

Invest in consumer education: 

The entire industry would greatly benefit from educational campaigns. Survey results showed a distinct lack of consumer knowledge regarding the chargeback process: when asked who footed the bill, only 27% of Americans correctly listed the merchant, while 18% stated they were unsure. Improving consumer awareness about the devastating effects of chargebacks could help limit the overall volume of false claims. 

Invest in good store policy and customer service:

For merchants, improved communication and customer service could help deter cyber-shoplifting. Around 55% of American customers stated that a generous returns policy would make them less likely to pursue a chargeback, while 60% in the U.K. said the same. More importantly, around 63% of U.S. consumers will contact a store for a refund before repudiating a charge. If customers receive high-quality customer service and access to simple refunds, they are less likely to improperly pursue a chargeback. Merchants can use this to reduce the overall dispute volume and enjoy better customer retention. 

Invest in a chargeback mitigation solution: 

Even though many merchants avoid fighting some or all of their chargebacks because it uses valuable business resources, untested customer disputes only encourage repeat offenders to misuse the chargeback system. If merchant win rates increase, the overall benefit of filing fraudulent claims by serial chargeback abusers will diminish. 

For margin-tight businesses that cannot engage in chargeback representment, a chargeback mitigation solution can help. Having a technical partner compile evidence and refute false claims defends against weaponized chargebacks without the extensive expense and risk to business growth.       

Looking to the future, limiting serial chargeback abuse from authentic cardholders should take top priority for all industry players. If left unchecked, weaponized chargebacks could weaken the trust of the entire eCommerce market and lead to higher consumer prices and lower merchant profitability.  

Learn more about fighting false chargebacks for eCommerce businesses here.


Consumers are turning to friendly fraud in growing numbers

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Ronen Shnidman

Ronen Shnidman



Member since

19 Jun 2022


Tel Aviv

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This post is from a series of posts in the group:

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