A new report by IMRG and Justt found that 44% of 1000 UK customers surveyed say they filed a chargeback in the last year – which is likely to go up, as retailers claim more and more customers are changing their mind.
Credit card chargebacks hurt retailers, as credit card issuers demand a reversal in payments (usually returning the money to the cardholder) due to a disputed transaction.
The survey found that 44% have filed a credit card chargeback in the last year, the most common reason being that the goods were not received. As the cost of living crisis continues to worsen, there could be an increase in the number of credit card disputes made against retailers, as customers commit ‘liar buyer’ fraud, or dispute items they later regret buying, says IMRG.
However, a quarter of respondents said they have filed or considered filing a chargeback not due to a problem with the item, but because they disagreed with the company’s values or policies. This adds a further wrinkle to the retail relationship, as customers find ways to retaliate financially against companies beyond the purchase decision.
However, retailers are being given the chance to rectify consumer claims first. Reassuringly, the majority of UK consumers (70%) would turn to the retailer first to give them the chance to rectify a problem, before making a credit card dispute about an item. This allows merchants a window of opportunity to address the issue before the bank or credit card issuers take on a chargeback. In fact, most customers will wait 4-5 days to receive an item before filing a chargeback, while many would wait longer.
For retailers looking to avoid chargebacks, 60% of customers said that a generous returns policy would make them less likely to file a chargeback against a merchant in the first place. Retailers could therefore consider enacting a longer returns window as one tactic to prevent the financial losses of credit card chargebacks.
Andy Mulcahy, strategy and insight director, IMRG, says: “There is growing evidence that people are looking to save money however they can, from bundling up orders to avoid paying for delivery twice to returning more items than they did previously. It seems likely that, given the pressure on discretionary spend, we may see a reduction in shopper patience in instances where the experience doesn’t match their expectations, which could lead to an even greater proportion issuing chargebacks.”
Roenen Ben-Ami, co-founder and chief risk officer, Justt, adds: “The survey shows that a near majority of UK customers not only understand the chargeback process, but have actively used it to dispute transactions. That figure will only grow during a time of global belt-tightening. To stave off significant revenue losses, merchants must not only rethink their logistics and return policies to pre-empt chargebacks, but also put in place proper resources and technology systems to manage disputes effectively."