Mercator Blog

Friendly Fraud Is Driving Increased Merchant Chargebacks
Date: December 23, 2019
Raymond Pucci
Director, Merchant Services

It’s not easy being a merchant today for a variety of reasons. Fierce competition exists in every vertical market, consumer shopping behavior has evolved, and then there’s Amazon. Additionally, merchants are often at loggerheads over swipe fees with payment providers including merchant acquirers/processors, card networks, and card issuers. Many merchants believe that the byzantine transaction fee structures are unfair and that card networks periodically force system changes on them. Whether it’s the EMV mandate for acceptance of chip cards at the point of sale (POS) or transaction dispute resolution, small and medium-sized merchants, especially, often feel they bear the brunt of changes thrust upon them. For the EMV transition, merchants paid the implementation costs of upgrading POS hardware and software, not to mention staff training time. The transition to chip cards significantly changed the dynamics of payment card fraud. Although EMV curtailed counterfeit card fraud at the point of sale, it did not eliminate payment card fraud altogether. Fraudsters just switched from in-store to e-commerce transactions in a major way. Now merchants find themselves wrestling with the chargeback process that is triggered when consumers dispute a transaction. Online sales growth exacerbates the chargeback problem. 

The Mercator Advisory Group research report, Merchant Chargebacks Are on the Rise Due to Friendly Fraud, delves into the causes and implications of chargeback and profiles selected chargeback services vendors that have emerged to provide merchant solutions.