What’s Behind the Sharp Rise in Chargeback Fraud?
One benefit 2020 brought was the accelerated shift toward digital payments, with many card issuers re-prioritizing payments initiatives and moving contactless and digital offerings to the top of the list. But this shift has also led to a sharp increase in fraud, disputes, and chargebacks.
A recent survey on the U.S. debit market by Worldpay and Forrester revealed that in 2020, there was more than a 50% increase in chargebacks, with 90% of merchants reporting lost revenue due to payments fraud. Additionally, chargeback fraud (also known as friendly fraud) has increased by 79% since 2018. Chargeback fraud occurs when a cardholder authorizes a transaction then disputes the charge. With an estimated chargeback volume in excess of 600 million incidents in 2021, according to PaymentsJournal, the increase is expected to overburden credit unions and card issuers.
What’s behind this sharp rise in fraud?
If you ask leading payments provider and Strategic Link partner LSC, the answer is simple: poor memory and the lack of important merchant details on transaction records.
Online shopping is fast and convenient. Almost too convenient. On many websites, consumers can make purchases with one click of their mouse. That means some people will easily remember making purchases at a retail location, but an online purchase may slip their mind. Additionally, they may not recognize a merchant’s transaction information as it is shown on their statement. When surveyed, over 90% of consumers said they wished more transaction and merchant information was provided through their digital banking apps to assist in transaction recognition.
Today’s consumers are busy and always on the go. With their lives moving so fast, they need readily accessible details about the purchases they’ve made when they open their digital banking apps or when reviewing statements online. This includes a clear merchant logo, full merchant name, when and where the transaction occurred, and a phone number to reach the merchant at that specific location. Providing this information as part of a credit union’s payments solution has the potential to prevent millions of dollars in chargebacks.
As a trusted payments provider for over 50 years, LSC’s solutions help credit unions compete and prosper in the financial marketplace. To learn how LSC can help relieve the burden of fraud management, visit its partner page online or contact the Strategic Link team to get connected. Additionally, you can meet with the LSC team directly at the 2021 MAXX Strategic Link Trade Show in Boise, Oct. 5-7. They’ll be at booth #49!