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Preventing and Handling Chargeback Disputes

Learn how to minimize your risk of fraudulent chargebacks and identify the different types of fraud that can impact your business.

Cover of Bolt's chargeback ebook
Introduction

Preventing and Handling Chargeback Disputes

Consumers spent $601.75 billion online with U.S. merchants in 2019, up roughly 15% from $523.64 billion spent the year prior, according to a new Internet Retailer analysis of industry data and historical U.S. Commerce Department figures. Unfortunately, as growth in online payments continues to climb so do instances of credit card fraud. Juniper’s research report estimates that retailers will lose around $130 billion in digital CNP (Card-not-Present) fraud between 2018 and 2023.

Online retailers who frequently accept fraudulent payments on their site are unintentionally leaving their businesses at risk.

In this ebook, we’ll help you better understand the various types of fraud that can affect online retailers, why they happen, and provide you with a list of tips to help you prevent both fraudulent and non-fraudulent chargebacks from occurring on your site.

“The adverse impact of fraudulent chargebacks extends far beyond the value of the item. Merchants are also losing money on the fulfillment cost, payment processing fees, and chargeback fees, not to mention the time spent detecting and fighting these chargebacks.” — Cathy Liu, Head of Risk, Bolt

Chargebacks are very similar to a refund, but instead of contacting the business directly, the consumer initiates a return of their funds by requesting their bank to forcibly take money from the retailer’s account. The bank will conduct their own investigation and if they feel that the consumer’s request is valid, the funds get returned to the consumer. Oftentimes the retailer has no say in this matter and won’t even know that the chargeback process is happening until after it has occurred.

Chargebacks only become problematic for businesses when they are misused by consumers looking to get access to products or services they are legitimately entitled to. Since customers are not obligated to return whatever was purchased, it is not uncommon for individuals to abuse the chargeback process and claim legitimate purchases as fraudulent to get their money back and also keep the item. Businesses selling digital products or high-risk products like non-FDA approved supplements are particularly susceptible to chargeback abuse. We’ll cover more about the true costs of ecommerce fraud in a later section.

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