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Survey: Chargeback fraud becoming harder to dispute

Three-in-four Americans and Brits filed a chargeback last year, according to data from Justt.

Chargebacks are on the rise, and a majority of retailers are leaving a portion of them undisputed, leading to decreased profits.

That’s according to a new survey of over 300 e-commerce chargeback managers worldwide from Riskified, conducted in partnership with Paladin Fraud. More than three-quarters (76%) of chargeback managers reported seeing as many or more chargebacks compared to last year, and nearly 60% are leaving at least two-in-five chargebacks undisputed.

Although intended to protect consumers, chargeback fraud is a growing trend by unethical shoppers to reclaim funds through deceptive means. Riskified says the cost and complexity of managing disputes, combined with the volume of claims, has “created chargeback chaos.” Three-in-four Americans and Brits filed a chargeback last year, according to data from Justt.

More than 73% of those surveyed said that at least 20% of their chargebacks are first-party fraud, making it trickier to dispute. More than half (55%) of merchants find that their current chargeback management process is too time-consuming, complex, and manual, adding to cost drivers and profit erosion.

According to a recent survey from LexisNexis Risk Solutions, retailers in the U.S. and Canada incur an average cost of $3 for every $1 of fraud. Brick-and-mortar respondents identified fraudulent chargebacks as the fastest-growing fraud type, while e-commerce respondents cited identity theft.

Merchants surveyed recognized they have room for improvement when it comes to recovering more revenue and increasing efficiencies, with 65% saying that they felt automation and the use of artificial intelligence to streamline some or all the processes would make the biggest impact. Half want to consolidate disparate platforms and manage all chargebacks from one centralized platform.

“Merchants are working extremely hard to operate profitably, but many are unaware of significant technology advances that offer a huge revenue recovery opportunity within chargeback operations,” said Jeff Otto, chief marketing officer at Riskified. “Riskified’s global merchant survey reveals that fraud and chargeback managers overwhelmingly agree that their current chargeback management processes are too complex and manual for the volume of chargebacks they are seeing. It’s no surprise that these hard working teams want AI-powered automation to help them dispute more chargebacks and win back more revenue.”

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