As online retailers salute a sales victory over brick-and-mortar stores this festive period, merchants need to be wary that their celebrations could be a little premature as chargebacks wait in the wings to take center stage in the New Year.
Chargebacks typically hit 60-90 days afterwards, so merchants enjoying the news that online sales have rocketed – with shoppers spending over £3.5 billion online over the Black Friday and Cyber Monday weekend alone – may want to wait until the start of 2016 to find out the true results, as chargebacks can significantly dent revenue.
In October this year, an EMV (Europay, MasterCard and Visa) milestone took place, as liability for fraudulent charges switched to the merchant in the US. As a result, chargebacks are expected to rise across the US, Europe and the UK as retailers adapt to the new rules and criminals turn online.
While EMV is welcomed by high-street merchants and their customers, it poses a serious threat to online retailers as they are considered a more vulnerable and, therefore, a more lucrative target for fraudsters. Online transactions are not protected by the embedded chip of EMV transactions as their high-street counterparts are, and instead often only require card digits and CCV numbers for verification making it much easier for fraudsters.
Recent reports showed that that friendly fraud chargebacks were one of the top four types of online fraud detected over the Black Friday period this year, and this trend could well extend into the final month of 2015. So with more sales and more money being spent online over the festive retail period, correlation dictates that online retailers are at risk of being hit with more chargebacks too.
For retailers, proper chargeback management should be a high-priority if they want to effectively recover lost revenue without increasing risks or costs.
