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.