We are currently in the peak time of year for chargebacks. A chargeback typically hits retailers 35-60 days after being filed by the consumer, so following the Christmas rush and January sales, many retailers may find themselves being hit hard.
The February chargeback season is often damaging to retailers, following what is usually a profitable period. And it’s a growing problem, with friendly fraud increasing 41% each year since 2011, while the average cost for €100 in fraud increased from €270 to €313 for merchants from 2013 to 2014 alone.
Why is this?
The e-commerce industry has dramatically expanded in Europe, creating a shift from in store purchases to digital and online sales. With the increase in online transactions and sales, especially during the festive season, new opportunities for fraudulent activity do not go ignored by fraudsters, which can include ‘regular’ members of the public.
Last minute shopping before Christmas often results in consumers feeling guilty for impulse purchases, while hastily purchased sales items are returned from late December to mid-January. This trend is particularly apparent in the clothing, jewellery and high-value technology sectors in a phenomenon known as buyer’s remorse.
Unwanted Christmas presents are also a popular item for returns, but customers often don’t return these straightaway, meaning the returns period elapses before they realise. This causes them to turn to their bank in order to get their money back another way.
Meanwhile, retailers suffer from damaged reputations, costly fines and loss of merchandise value, as well as being forced to raise prices to cover preventable losses, risking customer loyalty. The negative impact on banks and the economic balance is unavoidable without proactive, effective solutions to curb this growth rate.
Greater education in this area is needed to help manage this expanding risk, including helping consumers assess their options, while identifying potential fraud risks and exploring solutions for retailers such as showing greater leniency in their returns policies during what should be a profitable holiday season for merchants.
