In Focus Commercial Credit
Chargebacks: what do you know?
Chargebacks can be a legitimate form of consumer protection, but you need to deal with their abuse
Katherine Bailey Credit Manager, Valor Hospitality Europe
Katherine.Bailey @
valoreurope.com
I was recently pleased to present this topic at CCRInteractive, in association with Marston Holdings. It was a subject that got people’s attention on both the consumer and trade areas of business.
So what are chargebacks? They can be used to dispute card transactions and secure a refund for the purchase. They void a card transaction, withdrawing funds that were previously deposited into the merchant’s bank account and applying credit to the consumer’s card statement. It sounds simple, so why do we need to
read any further? Chargebacks differ from traditional refunds in one simple way: rather than
contact the business for a refund, the consumer goes over the merchant’s head and asks the bank to forcibly remove funds from the business’s bank account. If the bank feels the cardholder’s request
is valid, the funds will be removed from the merchant’s account and returned direct to the consumer. As a form of consumer protection, the
chargeback process is naturally skewed towards the cardholder’s safety. Looking at the figures below (provided by FICO) you can understand why. Card-not-present (CNP) fraud has gone
from 50% of gross fraud losses in 2008 to 70% in 2016. This major swing brings new challenges for banks and retailers, as
As a form of consumer protection, the chargeback process is naturally skewed towards the cardholder’s safety
criminals, thwarted by chip and PIN, have moved to a less risky channel, and taken advantage of online payment trends. Hiding amongst the growth in online
purchases is great from a criminal point of view, but finding and stopping fraudulent transactions just gets tougher.
UK Fraud Snapshot 2016 – e-commerce trend l 70% of the growth in 2016 is down to e-commerce. l Customer expectations – a quite seamless purchasing experience. l Card fraud up by 9% to £618m. l Fraud cases up by 22% to 1.8 million in volume. l E-commerce fraud up by 18% to £309m: 50% of all losses. l E-commerce genuine spend was £248bn in 2016, up from £210bn in 2015. It was £41bn in 2008. lMOTO down 10% to £123m. l CNP is 70% of the fraud mix. l Remote banking is down by 61% to £137m – this includes internet, telephone, and mobile. One of the key driving forces behind chargebacks is customer
January 2018
www.CCRMagazine.co.uk
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