The Impact of Disputes and Fraud

How Much Do Chargeback Fees Cost?

Chargeback fees cost between $20 and $100, depending on the merchant's agreement with their acquirer. When you add these fees up with all the other hidden and indirect costs, companies often lose more than twice the transaction amount for each chargeback. But part of the challenge is this: In addition to the transaction amount and the chargeback fee, chargebacks can also come with many expenses that merchants often don’t think about–or even know exist–until it’s too late:

Here are 7 key statistics related to the impact of disputes and fraud on merchant revenue:

1. E-commerce Chargeback Costs: E-commerce businesses, in particular, face substantial chargeback costs. During the pandemic, Mastercard predicted 615 million chargebacks by 2021. That translates into a big financial burden for businesses.
   
   Moreover, chargebacks are a rapidly growing problem that can put a serious dent in business profitability. This is especially true in a market where people are dealing with adverse conditions like a rising cost of living, which encourages criminal fraud and friendly fraud attempts.
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2. Retail Fraud Losses: For retail businesses, fraud can also be a significant issue. The National Retail Federation (NRF) reported that the average loss due to return fraud in the United States was estimated at $1,766 per fraudulent return in 2020.
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3. ‍Chargeback Rates: Chargeback rates can vary widely by industry, but on average, they typically range between 0.5% to 1% of total sales. Some high-risk industries may experience chargeback rates even higher than this average.
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4. ‍Friendly Fraud Impact: Friendly fraud, where a customer disputes a legitimate transaction, can be a substantial issue for merchants. It's estimated to account for a significant portion of all chargebacks.
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5. ‍Preventable Losses: A significant percentage of chargebacks are believed to be preventable. Effective fraud prevention and dispute management systems can help merchants reduce these losses.
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6. ‍Indirect Costs: In addition to the direct revenue loss from chargebacks and fraud, there are indirect costs, such as fees associated with the chargeback process, increased operational expenses for managing disputes, and potential damage to a merchant's reputation.
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7. ‍Global Impact: Disputes and fraud are not unique to the USA. They affect businesses worldwide. In 2020, global card fraud losses were estimated at around $27.85 billion. A story for another day.

Remember that the impact of disputes and fraud can vary widely depending on the industry, the size of the business, and the specific measures the merchant has in place to prevent and manage these issues.

To get the most current and industry-specific time-tested tactics, connecting with our Dispute.com team means you will be working with a payments and fraud prevention specialist who can offer insights and solutions tailored to your specific business.

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