According to a new survey from Javelin Strategy & Research, retailers of digital goods spend up to 20% of their operational budgets on fraud and chargeback management as they struggle to cope with the problem.
The report, titled “The Impact of Fraud and Chargeback Management on Operations” considers how companies may be expending financial resources to try to manage fraud and chargeback challenges rather than outsourcing to experts, diverting vital resources from investing in the sales and services which lie at the heart of a retailer’s business.
Hiring and training personnel costs represent up to 30% of fraud and chargeback spending for merchants. This company expenditure presents a significant hurdle to successful business growth.
According to the report, online merchants are becoming increasingly aware of the problem of chargebacks and many are left feeling like the investment they make on internal resources to combat these problems are simply not paying off.
With the US adoption of EMV, card-not-present (CNP) fraud is expected to soar, and this could see a surge in fraud-related chargeback rates, as fraudsters take advantage of seemingly more vulnerable online retail channels. This means that fraud and chargeback spend will come into focus for digital goods merchants, who must decide what proportion of their operational costs they are going to set aside to tackle these issues.
The statistics outlined in the report clearly shows in-house management of fraud and chargebacks can be a financial burden for retailers online. While the chargeback problem has been a constant presence, it hasn’t necessarily been in the forefront of merchants’ minds until recently.
A far more cost-effective approach to chargeback management is to enlist the help of third-party providers with extensive knowledge of the chargeback process. By combining this with best practice fraud prevention and customer service, merchants are better defended, both technologically and educationally, against the growing threat of chargebacks in our online world.
