We have much to be thankful for this holiday season. Whether you mark the beginning of your holidays with Thanksgiving, Bonfire Night, Halloween, or Aunt Martha’s birthday, holiday shopping began some time ago. That’s great news for ecommerce businesses.

Because online merchants turn into rock stars when consumers wrack their brains to create the best shopping list ever. Shoppers everywhere look online for just the right gifts. They make lists and check them twice before buying, hoping to find the best deals possible.

After all, what can be easier for shoppers than perusing the latest and greatest offers out there — no matter where they are?

Mobile phones, laptops, and tablets morph into buying machines with huge shopping carts. And shoppers don’t even have to push those carts through crowded retail store aisles.

How lucrative is this holiday season supposed to be? All signs point to “better than last year.” Per Digital Commerce 360, 2016 ecommerce sales in the U.S. alone topped $394 billion.

Worldwide, the numbers were beyond staggering. More than 7% of all 2016 retail sales occurred online, racking up an estimated $1.888 trillion for ecommerce merchants.

And 2017 holiday e-commerce sales look more promising than ever.

But as you count your ecommerce blessings and hunker down for a crazy-busy holiday season, don’t forget to keep an eye on holiday chargebacks. Don’t let them reduce your holiday cheer.

Chargeback vigilance matters year-round, though perhaps more so during the holiday shopping season. Let’s review some chargeback basics, and take a look at ways online merchants can combat those Grinch-like holiday chargebacks.

Out of Control Happens A Lot This Time of Year

Do you ever wonder why people get “out of control” so often around the holidays? It’s not only becoming legless at the office party (or at dinner with your girlfriend’s know-it-all Uncle Bob), but also neglecting to stay on the look out for potentially fraudulent transactions.

Dropping your guard as sales pour in opens the door for holiday chargebacks, since your most lucrative sales period is also a winner for fraudsters. They’re busier than ever too.

Suresh Dakshina (CEO of Chargeback Gurus) put it this way in an October 2017 PayThink post for PaymentsSource (emphasis ours):

Fraudsters deliberately target the holiday season, with more than half of annual fraud income taking place between September and December and chargeback rates increasing by up to 50% at peak shopping periods.”

Not Only Grinches Steal Holiday Cheer. Sometimes Your Customers Take A Bite Too.

We’ve talked about “friendly fraud” before, though no one thinks much of friends like these. As a refresher, let’s review these basics:

  • Friendly fraud — sometimes called chargeback fraud — occurs when customers make a purchase, then call their credit card issuing bank to dispute a charge, bypassing the merchant.
  • If the customer’s dispute “appears legitimate,” the issuing bank reverses the sales transaction, removing funds from the merchant and refunding them to the customer. A chargeback fee (of $20 and $100 per transaction) hits the merchant’s account.
  • “Fraud” comes into play when the customer actually made the purchase, but says he didn’t — receives the goods or services, but says he didn’t — or keeps the merchandise after receiving a refund. Lost revenue, plus chargeback fee, plus lost merchandise — they add up big-time and put businesses in jeopardy.
  • Merchants risk losing the ability to accept payment cards if their chargeback rate exceeds a threshold (normally 3%) set by the acquiring bank and/or the payment card brands. They may also be charged a whopping fine of up to $10,000.
  • No payment card acceptance, no ecommerce business. And fighting back on holiday chargebacks costs time and money too.

Some consumers make “friendly fraud” a habit, ignoring the negative impact on merchants. They go directly to the bank because it’s easier than calling the merchant to request a refund.

But how big a problem does friendly fraud represent, really?

Experts at Chargeback.com (builder and purveyor of tools to fight chargeback fraud) estimated that ecommerce merchants suffered nearly $7 billion in fraud losses in 2016.

Landing page optimization company Invesp estimated $6.7 billion, with $4.8 billion (71%) due to friendly/chargeback fraud. Perhaps most damning is that  “40% of consumers who file a fraudulent chargeback will do it again within 60 days and 50% within 90 days.”

Slay the Chargeback Grinch with Fraud Fighting Tools

With holiday shopping underway, fraudsters (criminal and friendly) already have their sights set on helping themselves to your revenues. Holiday chargebacks may take some time to materialize (through Q1 2018 in most cases), but merchants know they’re coming.

Rest assured that you can take control — and fight fraud — with the right tools. For example, help ensure your business success by choosing the right processing partner.

Be sure to choose a partner who offers a PCI-DSS (Payment Card Industry Data Security Standard) Level 1 compliant payments gateway. We’ve often documented other best practices and ideas to fight fraud-related chargebacks and associated chargeback fees.

Merchant vigilance remains important throughout the year, not only in the season of holiday chargebacks. Check out the good practices that help with the fight against fraud here, here, and here. (And don’t overlook the surprising impacts of customer service on chargebacks.)

So as you prepare your own holiday gift list add, “choose MerchACT as a processing partner” — because we view ecommerce merchants as our business partners. And we’ll stick around to help if things go awry with holiday chargebacks. Because that’s what good partners do.

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