70% of Merchants Fell into Chargeback Monitoring

Jan 11, 2022

In a recent study, businesses across industries shared their thoughts on the spike in chargebacks since March 2020. Nearly 60% of respondents revealed that, since the onset of the COVID-19 pandemic, their chargeback rates have increased significantly. Another 45% believe that delivery delays are to blame.

Since the start of the pandemic, consumers have been forced to stay in their homes. Work, school, food, and entertainment were quickly replaced with lockdowns and social distancing. Remote work, homeschooling, curbside pickup, and delivery took the place of normal day-to-day comings and goings.

As a result, eCommerce leaped years ahead of its time. Supply chains buckled under the demand, which caused delivery delays consumers were not used to in a world that has previously enjoyed same-day delivery. This led more consumers than usual to initiate chargebacks. Merchants across the board strongly believe that their customers initiated chargebacks because they were expecting deliveries that ended up being delayed.

The Biggest Concern with High Chargeback Rates

These merchants have a very legitimate concern. Chargebacks are a very real threat to businesses both large and small. If a merchant isn’t careful, too many chargebacks can cause their merchant account to be closed. It can also mean hearing “no” when trying to set up a new merchant account or having funds placed on hold.

Due to the recent challenges, more merchants than ever are reporting chargeback rates that exceed the 1% threshold, which ultimately threatens to land them on one of the networks’ chargeback monitoring programs. According to a recent study, 47% of online merchants estimate their current chargeback rate to sit between 0.6 and 1 percent. Meanwhile, one-third say their current chargeback rate exceeds 1%.

The most alarming revelation is that, in the past 12 months, 70% of respondents said their business found itself in a fraud monitoring program because of the high number of chargebacks due to fraud. The top chargeback challenges overall were:

  •       Lack of experience in chargeback protection (32%)
  •       Lack of chargeback prevention strategies (22%)
  •       Not having enough resources to dispute chargebacks (17%)

How to Protect Against Chargebacks

Helping your business avoid as many chargebacks as possible boils down to the payment processing provider you choose to partner with. You want to work with a provider that understands your business type and the challenges you face. This ensures they are equipped with the knowledge, tools and support necessary to not only manage chargebacks when they occur, but also prevent them down the road.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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