Majority of Online Retailers Leave +40% of Chargebacks Undisputed, Contributing to Lost Revenue and Eroding Profits
March 25 2024 - 8:00AM
Business Wire
Process inefficiencies are leading to a large
volume of uncontested chargebacks, even when 73% of merchants
believe at least 20% of their chargebacks are first-party fraud
Riskified (NYSE:RSKD), a leader in fraud prevention and risk
intelligence, today unveiled Chargeback Challenges and What You
Can Do About Them: Global Insights 2024, a survey conducted in
partnership with Paladin Fraud of over 300 ecommerce chargeback
managers worldwide to explore how the rising rates of chargebacks
are causing chaos for online merchants and eroding profits. The
survey reveals significant and avoidable revenue losses for
businesses at a time when the economic backdrop continues to be
unstable and many are fighting for survival, prompting merchant
respondents to highlight the need for AI and automation to improve
some or all of the process.
Chargebacks serve as a mechanism for cardholders to dispute
purchases with their payment issuers instead of a merchant, often
leading to the rightful reversal of the transaction by merchants.
Although intended to protect consumers, there's a growing trend
where this process is being exploited by unethical shoppers to
reclaim funds through deceptive means. The cost and complexity of
managing disputes, combined with the sheer volume of claims - three
in four Americans and Brits filed a chargeback last year (Justt) -
has created chargeback chaos. Merchants are losing essential
revenue as a result.
Key findings from Riskified’s Chargeback Challenges report
include:
- Chargebacks are on the rise with 76% of chargeback
managers seeing as many or more chargebacks year over year.
- Merchants are electing to let revenues slide, with
nearly 60% leaving at least two in five chargebacks
undisputed.
- Reversal of sale is just the tip of the iceberg – 55% of
merchants find that their current chargeback management process is
too time-consuming, complex, and manual, adding to cost drivers and
profit erosion.
- ‘Friendly fraud’ is a key part of the problem, with more
than 73% saying that at least 20% of their chargebacks are
first-party fraud, making it trickier to dispute.
- Over 65% of merchants want AI and automation for some or all
of the chargeback management process to help recover more
revenue and increase efficiency.
Chargeback claims started trending upward during the COVID
pandemic, as online shopping boomed and customers looked to recoup
funds without leaving the house or having to navigate merchant
customer service. As this pattern continued beyond the pandemic,
the way merchants manage chargebacks and the process to collate
evidence to dispute fraudulent claims has failed to evolve at the
same pace, resulting in highly manual processes, technical and data
silos, and bureaucratic burdens that all exacerbate challenges and
add to the cost of chargebacks beyond the reversal of sale
itself.
Over half of merchants cited the current chargeback management
process as too time-consuming. With the influx of chargebacks,
operations teams are very likely to miss the most important dispute
candidates, such as first-party fraud which accounts for at least
one-fifth of chargebacks, because of limited time, bandwidth, or
easy access to data and evidence.
Across the board, merchants surveyed recognized they have room
for improvement when it comes to recovering more revenue and
increasing efficiencies. 65% felt automation and the use of
artificial intelligence to streamline some or all the processes
would make the biggest impact, and half want to consolidate
disparate platforms and manage all chargebacks from one centralized
platform.
“Merchants are working extremely hard to operate profitably, but
many are unaware of significant technology advances that offer a
huge revenue recovery opportunity within chargeback operations,”
said Jeff Otto, Chief Marketing Officer, Riskified. “Riskified’s
global merchant survey reveals that fraud and chargeback managers
overwhelmingly agree that their current chargeback management
processes are too complex and manual for the volume of chargebacks
they are seeing. It’s no surprise that these hard working teams
want AI-powered automation to help them dispute more chargebacks
and win back more revenue.”
In January, 2024, Riskified launched an enhancement to Dispute
Resolve, an all-in-one chargeback management system that empowers
chargeback operations teams to automate disputes at scale.
Leveraging seamless integrations to dozens of payment gateways and
AI-powered automation, Dispute Resolve can help merchants improve
win rates.
About the research
Riskified partnered with industry advisors Paladin Fraud to
interview more than 300 merchants worldwide, specifically the
personnel dealing with chargeback management every day, to discover
the size of the chargeback challenge, how merchants manage
chargebacks today and how to improve the process. The companies
represented include a wide range of verticals across physical and
digital goods, including fashion, travel, food (grocery and
delivery), electronics, and marketplaces, among others. Access the
full report - Chargeback Challenges: Global Insights 2024 - on
Riskified.com.
About Riskified
Riskified (NYSE:RSKD) empowers businesses to unleash ecommerce
growth by taking risk off the table. Many of the world’s biggest
brands and publicly traded companies selling online rely on
Riskified for guaranteed protection against chargebacks, to fight
fraud and policy abuse at scale, and to improve customer retention.
Developed and managed by the largest team of ecommerce risk
analysts, data scientists and researchers, Riskified’s AI-powered
fraud and risk intelligence platform analyzes the individual behind
each interaction to provide real-time decisions and robust
identity-based insights. Learn more at Riskified.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20240325052003/en/
Aileen McNelis PR for Riskified amcnelis@nexttechcomms.com
Cristina Dinozo Sr. Director of Communications press@riskified.com
Chett Mandel Head of Investor Relations ir@riskified.com
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