This in-depth analysis brings to focus the alarming scope and lasting effects that disputes and chargebacks present throughout the card payments ecosystem.

Verifi commissioned the report with Javelin Strategy & Research to examine the root causes of disputes, exploring how consumer behaviour changes based on experiences in the dispute process and the immediate, lasting and significant impact on merchants and issuers. The report found that consumer disputes and chargebacks created $31 billion in financial losses in 2017, with merchants bearing nearly $19 billion of the costs and issuing banks incurring the remaining $12 billion.

Entitled “The Chargeback Triangle,” the 36-page report provides a comprehensive view of the present chargeback lifecycle, as well as a detailed breakdown of the significant chargeback costs and negative impacts to issuers and merchants. More important, the report helps reveal opportunities to streamline the dispute process, and - in some cases - how to avoid chargebacks altogether.

Some key findings include:

• Consumers reduce purchase behavior with a merchant by as much as 62% following a chargeback - and nearly two-thirds of consumers are more cautious about patronising merchants similar to the one with which the dispute occurred.
• When the resolution process is drawn out, blame tends to shift toward the issuer that stands to lose top-of-wallet status and possible loss of consumer.
• Consumers largely call the bank to initiate a dispute. Assessing friendly fraud risk can be a challenge for issuers, and both merchants and issuers agree that it has become too easy for consumers to dispute transactions.
• Chargebacks can be prevented more than 80% of the time when the consumer contacts the merchant first with a dispute
• For every dollar in a disputed transaction, merchants and issuers incur an additional $1.50 in costs, including technology, personnel, and external resources.

Matthew Katz, CEO at Verifi, stated, “Some of the findings can be hard to accept, but the report validates the innovation and services we provide are consistent with the need to help reduce the high and unnecessary costs that disputes and chargebacks create for all parties in the payments chain. The report clearly indicates that collaboration between issuers, merchants and consumers is critical to resolve disputes effectively and avoid the direct and extended costs chargebacks and consumer-initiated “friendly fraud” cause for merchant and issuers alike. In the end, the consumer pays the price in the form of higher purchase prices as well.”