2024年支付風(fēng)控全球洞察 Chargeback challenges and what you can do about them

riskified

Chargebackchallenges

andwhatyoucandoaboutthem

Globalinsights2024

NeworderNeworder

ackNeworderNeworder

NeworderNewchargeback

derNeworderNeworder

ChargebackrecoveredNeworder

NeworderNeworder

NeworderNeworder

NeworderNeworder

Contents

Executivesummary

3

01

Keyelementstounderstandingchargebackchallenges

Methodologyandglossaryofkeyterms

5

02

Howmanagingchargebacksbecamechaoticformerchants

9

03

Whychargebackmanagementissocomplex

13

04

Chargebackmanagementtransformed—fromcostbuckettorevenuerecoverymachine

20

05

Fourwaysmerchantscanimprovechargebackmanagement

23

Chargebackchallengesandwhatyoucandoaboutthem

2

Executivesummary

Intheboomingecommercelandscape,salessoar

annually,offeringlucrativeopportunitiesforbothestablishedgiantsandnewcomerstogrow.Butthisinfluxofsalesalsoleadstorisingchargebackrates.

Consumersincreasinglyturntochargebacksasameanstorecoupfunds,witharound75%ofAmericanandBritishcustomersfilingachargebackin2023*.Often,consumersfilethesechargebacksbecausetheygenuinelyhaven'treceivedanitemortheircardhasbeencharged

fraudulently.However,increasingly,consumersfile

chargebackstoreceivecompensationunderfalse

pretenses.

So,asecommercesaleshavegrown,sotoohave

chargebacksand,inturn,chargebackfraud.Addtothatthetremendouscomplexitiesandinefficienciesinmanaging

chargebacks,andmostwouldagree:ecommercehas

enteredaneraofchargebackchaos.

Merchantsknowfraudulentclaimsconstituteasignificant

portionoftheirtotalchargebacks,knownasfirst-partyfraud.Butcurrentmanagementprocessesmakeitmorecostly

todisputefraudulentclaimsthantosimplyacceptthem

inthelongrunorevenproactivelyrefund.

Newchargeback

NEWAOe=

Newchargeback

New

Newchargeback

Newchargeback

Neworde

Newchargeback

Newouer

Newcharcaha

k

Chargebackchallengesandwhatyoucandoaboutthem

Executivesummary

Consumerattitudestowardschargebacksin2023:ComparingtheU.KwiththeU.S.

(TelAviv:JUSTT,2023)https:/fjusttai/consumer-attitudes-towards-chargebacks/

3

Merchantsfacenochoicebuttoletrevenuesslipaway

duetoine?cienciesinchargebackmanagement.As

chargeback?guresrise,itserosiononpro?tsisreachinganepidemicpoint.

Riski?edpartneredwithindustryadvisorsPaladinFraudto

interviewmorethan300chargebackmanagersfromleadingmerchantsworldwidetodiscover:

●Thesizeofthechargebackchallenge

●Howmerchantsmanagechargebackstoday

●Thebiggestpainpointsinchargebackmanagement

●Howmerchantscanrealizeabrighterfutureforchargebackmanagement

Atahighlevel,theresearchfound:

Chargebackscontinuerisingwith76%ofchargebackmanagersseeingasmanyormorechargebacksYoY.

Merchantsstruggletorecoupcosts,withthreeinfourmerchantsrecoveringlessthanhalfofallchargebacks.

Moreworryingly,merchantsknowinglyletrevenueslip

away,withmorethan73%sayingthat20%ormoreoftheirchargebacksare?rst-partyfraud(fraudulentchargebacksbycustomers).

Thetruecostofchargebacksquicklycreepsupbeyondlostmerchandiserevenue,drivenbycomplex,time-consuming,andine?cientchargebackmanagementprocesses.

Whenitcomestomanagingchargebackdisputes,merchantswantmoreautomation,platformconsolidation,betterdatamanagementandreportingabilities,andmoretoolstoaidprevention.

Chargebackchallengesandwhatyoucandoaboutthem

Executivesummary

4

01

Keyelements

tounderstanding

chargeback

challenges

Chargebacksexisttoprotectcardholders,butincreasingly,they

enableconsumerstobehavebadly,recoupingfundsunderfalse

pretenses.First-partyfraud,referringtochargebacksfiledforfalsereasons,informsasignificantportionofchargebacks—and

merchantsknowit.Buttheinefficienciesandtechnicalcomplexitiesofcurrentmanagementprocessesmakeitmorecostlytodisputefraudulentclaimsthantosimplyaccepttheminthelongrun.

Inefficienciesinchargeback

managementforcemerchants

toallowrevenuetoslipaway.

Thisprofiterosionhasreached

anepidemicpointaschargeback

figurescontinuetorise.

5

Methodology

Merchantsbyregion

RiskifiedpartneredwithindustryadvisorsPaladinFraudto

interviewmorethan300merchantsworldwide,specifically

thepersonneldealingwithchargebackmanagementevery

day,todiscover:

·Thesizeofthechargebackchallenge

·Howmerchantsmanagechargebackstoday

·Thebiggestpainpointsinchargebackmanagement

●Howmerchantscanrealizeabrighterfuturefor

chargebackmanagement

Thecompaniesrepresentedincludeawiderangeofverticalsacrossphysicalanddigitalgoods,includingfashion,travel,food(groceryanddelivery),electronics,andmarketplaces,amongothers.

16%

41%

19%

23%

ThemajorityofrespondentsoperatewithinNorthAmerica,

withsignificantrepresentationfromEMEA(Europe,Middle

East,Africa),LatinAmerica,andtheAsiaPacificregions.

NorthAmerica:41%

EMEA(Europe,MiddleEast,Africa):23%

LatinAmerica:19%

AsiaPacific:16%

Other:1%

Chargebackchallengesandwhatyoucandoaboutthem

Methodology

6

Annualrevenueofmerchants

Percentageofmerchants

Asubstantialportionofmerchantsinthestudyreported

annualsalesvolumesbetween$500millionand$3billion,followedbythoseinthe$75millionto$500millionrange.

Chargebackchallengesandwhatyoucandoaboutthem

Methodology

Participantsbycompanydepartment

50%

18%

15%

15%

2%

Accountingorfinance

Risk/lossprevention

Other

Customer

success

Independent/

Cross-

dept.team

Percentageofmerchants

Chargebackmanagementteamsoperatethroughdifferentoperationalstructures.Justover50%ofthoseinthestudyreportthroughadedicatedrisk/losspreventionteamwithjustunder18%throughcustomersuccess.

7

Glossaryoffourkeyterms

01

Chargebackrate

Thepercentageofchargebacksamerchantreceivesoutofallsales.

02

Chargebackwinrate

Thepercentageofchargebackdisputes

thatamerchantsuccessfullywinsoutofall

chargebacksdisputed.

03

Chargebackrecoveryrate

Thepercentageofchargebackdisputes

thatamerchantsuccessfullywinsoutofallchargebacksreceived(whetherdisputed,accepted,orotherwise).

04

First-partyfraud

Alsoknownas“chargebackfraud,”

“chargebackabuse,”and“l(fā)iarbuyer,”?rst-partyfraudreferstochargebacksthathavebeen

?ledfraudulentlybycustomers.

Chargebackchallengesandwhatyoucandoaboutthem

Glossary

8

02

Howmanaging

chargebacks

becamechaotic

formerchants

Inrecentyears,ecommercesalessurgedandchargebacks

skyrocketed.Infact,inthelastyearalone,morethanthreeoutoffourcustomersintheUnitedStatesandUnitedKingdomfileda

chargeback*—anall-timehigh.Chargebacksnowrepresentanormalpartofconsumeronlineshoppingbehaviorandasignificantpartof

ecommercebusinessmanagement.

Threeoutoffour

customersintheUnitedStates

andUnitedKingdomfileda

chargebackinthelastyearalone

一anall-timehigh.*

Consumerattitudestowardschargebacksin2023:ComparingtheU.KwiththeU.S.9

(TelAviv:JUSTT,2023)https:/fjusttailconsumer-attitudes-towards-chargebacks/

76%ofchargeback

managerssaychargebacks

Theupwardtrendinchargebacks,inpart,stemsbacktotheCOVIDpandemic.Ofcourse,onlinereturnsandchargebacksexistedbefore2020,buttwokeybehavioralshiftslefta

lastingimpact:

·First,customerswereafraidtoleavethehouse

toshop,spurringtheonlineshoppingboom.

Second,chargebackstookoffaspeoplewere

alsolessinclinedtogothroughthereturnsprocess,whichofteninvolvedanin-storevisitoratripto

thepostoffice.

AreyouseeingachangeYoYinthevolumeofchargebacks?

30%

27%

20%

11%

12%

Yes,it's

increasingsignificantly

Yes,it's

increasingalittle(<10%)

No,it'saboutthesame

Yes,it's

decreasing

significantly

Yes,it's

decreasinga

little(<10%)

(>10%)(>10%)

Percentageofmerchants

haveincreasedorremained

steadyinthelastyear,with

morethanathirdofthose

describing“significant”growth.

Chargebacksbecamepopularduringthepandemicfortheirconvenienceandsafety.Muchlikeonlineshopping,this

chargebackstrenddidn'trecedewhenlifereturnedto

normal.It'sreasonabletoassumecustomerpsychology

changedtoo-ifsuccessfullyreimbursedviaachargeback,customersfeelemboldenedtoclaimagain.Abusiveand

fraudulentclaimsbecamefarmorenormalizedwithoutthetraditionalfeelingsof“shame”associatedwithcommittingfraudin-store

Chargebackchallengesandwhatyoucandoaboutthem

Howmanagingchargebacksbecamechaoticformerchants

10

Merchants'profitscontinuetoerodeyearoveryeardueto

chargebacks.Withsomucheffortandcostinvolvedin

disputingchargebacks,it'sunsurprisingmanymerchants

weighwhetherit'sworththeeffortorcheaper,inthelongrun,tosimplyacceptfraudulentchargebacksasacostofdoingbusiness.

Threeinfourmerchantsrecover

lessthanhalfofallchargebacks

Nearly60%leave40%ormore

ofchargebacksundisputed

Atwhatratedoyoudisputechargebacks?

<10%

3%

10-20%

4%

20-30%

3%

30-40%

2%

40-50%

11%

50-60%

6%

60-70%

3%

70-80%

15%

80-90%

90-100%

29%

24%

Percentageofmerchants

Chargebackchallengesandwhatyoucandoaboutthem

Howmanagingchargebacksbecamechaoticformerchants

11

Merchantsfaceimpossibledecisionsconsideringwhich

chargebackstheycansourceenoughevidencefororarelikelytowin.AfterperiodsofhighspendingsuchasBlackFriday/CyberMonday,soonaftercomesaninfluxof

chargebacksthatteamssimplydon'thavetheresourcestohandle.

Morethan73%ofmerchants

believe20%ormoreoftheir

chargebacksarefirst-partyfraud.

Fraud

<10%

10-20%

20-30%

30-40%

40-50%

50-60%

>60%

chargebacksthatarefirst-partyfraud

12%

9%

11%

9%

9%

15%

35%

Percentageofmerchants

Chargebackchallengesandwhatyoucandoaboutthem

12

Howmanagingchargebacksbecamechaoticformerchants

03

Whychargeback

managementis

socomplex

Thetruecostofchargebackmanagementcreepsupfromdisparatesources,fromvaryingbankprocessingfeestothecostofgoodsandserviceslost-plustheoperationalexpensestorampupstaffto

supportchargebackoperationsduringseasonalspikes.Withmost

merchantsoperatingacrossseveralpaymentgateways,truly

comprehendingthecostandcomplexityofchargebackmanagementcanbeastruggle.

Theobviouscost—reversalofsale

●Valueoflostmerchandise

●Shippingcosts

●Chargebackprocessingfee·Operationalcosts

oFull-timeemployeesworkingonchargebackteams一onaverageonetothree

oEmployeetimeoneachdispute

oRootcauseanalysisandprevention

·Marketingcoststopromotetheitem

●Riskoflosinganacquiringaccountandpotentialfines(inextremecases)

Thefindingsinthisresearchrevealthreekeychallengesdriving

chargebackmanagementcostsandprofiterosion:operational,

technical,andbureaucratic.

13

Keychargebackmanagement

challenges

55%

managemultiple

chargebacksacross

multiplesystems

55%

findprocesstoo

time-consuming

36%

lackvisibilityand

difficultyin

and

monitoring

reporting

35%

can'taccessor

useallrelevant

dataasevidence

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

Newchargebacewchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newchargeback

Newcharge

Ne

Newcl

14

back

為e。

Currentchargebackmanagementchallenges

Processistootime-consuming

Lackofvisibility,difficulty

monitoring,andreporting

Inabilitytoaccessoruseall

relevantdataasevidence

Performanceistoolow

Notenoughheadcount

Difficultywithscalabiltyresulting

fromincreasedvolume

Other

55%

36%

35%

27%

23%

20%

12%

Percentageofmerchants

15

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

Operationalchallenges

tochargebackmanagement

Today,sizableteamsfocusonmanagingchargebacks.

Eventhe“simple”firststepsofidentifyingandcategorizingchargebackstakestime.However,justover60%of

chargebackteamsoperatewithonlyonetothreefull-timeemployees,androughlythesamepercentagemanage

chargebacksfullymanually.

Thehoursquicklyaddupwhennearlytwoinfivemerchantsspendatleast10minutesperdispute,and18%spendmorethan20minutesadispute.Teamsalsoinvestsignificant

timeinrootcauseanalysisandpreventionefforts,ahighlyresource-intensiveactivityifdonemanually.Unsurprisinglythen,that55%thinktheprocessistootime-consuming.

61%ofchargebackteams

operatewithonetothreefull-time

employees.

Numberoffull-timechargebackmanagementemployees

Percentageofmerchants

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

16

Operationalchallenges

tochargebackmanagement

Towinachargebackdispute,merchantsneedtocompile

evidencefromvariousgateways,teams,anddatastreams.

Thismeansdisputesandevidencecaneasilyfallthrough

thecracks,notforgettingthatteamsoutsideoffraudand

chargebackmanagementwillnaturallyconsideritlessofa

prioritytofindandsupplyevidence,whichcanfurtherhamper

Howmuchtimeonechargebacktakestoprocess

51%

efforts.

Twooutoffivemerchantsspendatleast

10minutesperdispute

O

18%spend20+minutesperdispute

17%

11%

5-10mins

<5mins

10-15mins

Percentageofmerchants

3%

15-20

mins

12%

20-25

mins

6%

>25

mins

17

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

Technicalchallengesto

chargebackmanagement

Technicalchallengesalsocausemajorheadachesin

chargebackmanagement.Mostmerchantsworkwith

severalpaymentserviceproviders(PSPs)andacquirers,soamajorchallengehereisthefragmentedtechnicaloperationthatunfolds.

Firstofall,teamsaccessandcorrelateinformationfrom

variousdisconnectedsystems,makingtheprocessslow

andcomplicated.Collectingandorganizingevidencefromseparatesourcesaddstothemanualload,leadingto

increasedhumanprocessingtimeandhigherriskoferrors.Finally,thedisparate,disjointedsystemscreatefragmenteddatathatteamsstruggletocollate,interpret,andmake

e?ectiveuseof.Theendresult:alackofclarity

intodisputeperformance,anddi?cultytrackingand

reportingonKPIs.

Merchantresponsessupportthis—morethanhalf(55%)

foundhavingtomanagechargebacksacrossmultiple

systemswasamajorchallenge.Theinabilitytoaccessoruseallrelevantdataasevidenceremainsakeychallengefor

35%,whileasimilarnumberfeltalackofvisibilityand

di?cultyinmonitoringandreportingweremajorhurdles.

55%

managemultiple

chargebacksacrossavarietyofsystems

35%

can’taccessoruseallrelevant

dataasevidence

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

18

Bureaucraticchallengesto

chargebackmanagement

Disputingchargebackclaimsalsocomeswithlotsof

regulationsandrules,primarilyfromcardschemesand

issuers,thatmaketheprocessmorecomplicatedandrequire

merchantstokeepaneyeonchangesandupdateprocesses

quicklyinlinewithregulations.

Paymentnetworksenforceincreasinglystricterguidelines

abouthowmuchinformationtheyneedtoauthorizea

chargeback.Periodically,theseregulationsevolvetoo.For

example,VisarolledoutCompellingEvidence(CE)3.0*in

April2023forfraudchargebacks,whilePayPalchangedits

SellerProtectionProgram**rulesinJanuary2024.Bothof

theserequiredmerchantstoquicklyadjustprocessesto

maintaincomplianceandsuccessfullyfiledisputes.Finally,in

extremecasesofexcessivechargebacks,merchantsrisk

losingacquiringaccountsorrackinguppotentialfines.

AlonLivneh,"UpdatestoVisaCompellingEvidence:WhattoknowaboutCE

3.0”Riskified,March9,2023.

"DanielKolko,"PayPalannouncessellerprotectionrulechangesformerchants

一here'swhat'schanged"Justt.ai,January2,2024.

Whychargebackmanagementissocomplex

Chargebackchallengesandwhatyoucandoaboutthem

Specialconsideration:Onlinetravelagencies

Spotlight:Travelandchargebackmanagement

Theresearchrevealedthattravelcompaniesonthewhole

benchmarkhigherthananyotherindustryforannual

chargebackratesandillustratessomeofthekeychallenges:Lower-than-averagerecoveryrates:Nearly90%of

respondentsseerevenuerecoveryoflessthan45%,

andzeroofthetravelmerchantssurveyedsawrecovery

ratesabove60%

Highratesoffirst-partyfraud:Halfoftravelmerchantsestimatedtheirrateofabusivechargebacksabove40%.

oWorryinglylowdisputerates:Justover50%oftravelmerchantsdisputelessthan10%oftheirchargebacks,andonly14%disputebetween80%to100%.

Biginternalteams:Themajorityhavefourfull-time

employees,while21%havemorethanfiveemployeesdedicatedtochargebacks.

Whatwouldmakethedifference?

Travelmerchantsoverwhelmingly(86%)wanttoautomatesomeoralloftheprocess.They'dalsoliketohaveone

centralizedplatformandtheabilitytomakebetteruseofdatatodisputechargebacks.

Travelmerchants(86%)

overwhelminglywanttoautomate

someorallofthechargeback

managementprocess.

andchargebacks

Onlinetravelagencies(OTAs)faceacute,uniquechallenges

withchargebacksbecauseoftheintermediaryroleplayed

betweencustomersandairlines.OTAshavenodirectcontrol

overmuchofthedataneededtoevidenceanddisputea

chargeback,includingdataandtransactiondetailsfromthe

airline,proofofservice,orcustomerinteractioninsights.

Relyingonairlinestoprovideaccurateandtimelyinformationthereforeexacerbatesexistingchargebackmanagement

challengesandsignificantlyhinderstheabillitytodispute

chargebacks.

Chargebackchallengesandwhatyoucandoaboutthem

Whychargebackmanagementissocomplex

20

04

Chargeback

management

transformed一

fromcostbucket

torevenue

recoverymachine

Chargebackmanagementcreptupontheecommerceindustryasanissue.Risingchargebackratesexacerbatedthecomplexityandlostrevenuestoapointwhereitcannolongerbeignored.JustasfraudpreventionshiftedinthelastdecadetobecomemoresophisticatedandAl-based,chargebackmanagementisreadytohaveitsdigitaltransformationmoment.

21

Howcanchargeback

managementbemore

e?ectiveande?cient?

Merchantscurrentlyuseacombinationofin-house,

third-party,orahybridapproachtomanagement,withthemajority(59%)managingallin-house.

Regardlessofwhatapproachtheytakeorplantotake,

chargebackmanagersknowtheyhavesigni?cantroomforimprovementtorecovermorerevenueandincrease

e?ciency,accuracy,andmeasurement.

Mostimportantwaystochangechargebackmanagement

●Increasedautomation:

Themostrequestedimprovementacrossmerchants(65%)wasforamoreautomatedprocess.

●Simple,centralizedaccess:

Halfofrespondentsstressedtheneedtobeabletoaccessallchargebacksinoneplace.

●Betterlabelingandevidencemanagement:

Lessthan15%ofrespondentscustomizecompellingevidencebygateway/PSP,just17%byissuer,andastaggering35%don’tevencustomizeforreason

categories.

●Improvedpreventionstrategies:

Onethirdofchargebackmanagersfeltthattheycould

getmoreinvolvedinprevention,usingrootcausechargebackdataasafeedbackloopintothe

fraud-screeningprocess.

Chargebackchallengesandwhatyoucandoaboutthem

Chargebackmanagementtransformed—fromcostbuckettorevenuerecoverymachine

22

Topwaystochangechargebackmanagement

Automatesomeoralloftheprocess

Manageallchargebacksfromonecentralizedplatform

Improvemeasurementandreporting

Usemoredataincompellingevidence

Getmoreinvolvedinupfrontchargeback(fraud)prevention

Hiremorepersonnel

7%

65%

50%

47%

46%

32%

Percentageofmerchants

automate

someorall

oftheprocess

50%

manageall

chargebacksfrom

onecentralized

platform

47%

improve

measurement

andreporting

46%

usemoredata

incompelling

evidence

32%

increase

involvementin

upfrontchargebackprevention

Chargebackchallengesandwhatyoucandoaboutthem

23

Chargebackmanagementtransformed—fromcostbuckettorevenuerecoverymachine

05

Fourways

merchants

canimprovechargebackmanagement

Newchargebackis

Then

Autoassign

PayPal,under$50,autosubmit

When

Newchargebackis

Then

Createevidencedocthen

Under$50

@Erik

Active

Under$50

Submit

Paypal,dateabouttoexpire,autoAccep

When

Newchargebackis

Then

Acceptchargeback

to

01Automation

Applyingautomationtosomeorallofthechargebackmanagementprocessincreasesefficiencymoreeffectivelythananyotheraction.Automationcanbeappliedinatieredstrategytoo.Forexample,

lowervalueormorestraightforwardchargebackscanbeautomated,whilemorecomplex,sensitive,andhighervaluecaseshandledwiththeexpertiseofagents.Automationalsofreesupteamstofocusonmorestrategicandchallengingdisputesandempowersthemto

tacklewhatmightpreviouslyhavegoneuncontested.

24

Fourwaysmerchantscanimprovechargebackmanagement

02Platformconsolidation

Centralizingdifferentchargebacksourcesnotonlymakeslife

easierforchargebackmanagersbutstopschargebacksand

keyevidencefromfallingthroughthecracks.Acentralized

platformcanserveasaone-stopshopforchargeback

management,whilealsostoringallhistoricaldata,documents,

andevidence.

03Datamanagementandreporting

Buildingontheabove,chargebackmanagersstruggletocompile,label,andslicedataastheyneedto.Asaresult,understandingperformanceandreportingbecome

challenging.Havingbettermeanstocaptureandcategorizechargebacks