As consumer chargebacks continue to soar, fintech executive, entrepreneur and author Monica Eaton-Cardone is urging retailers and brands to fight back — especially in regard to “friendly fraud” — by taking a more disciplined business approach and avoiding taking on a “concierge role.”
Eaton-Cardone, who cofounded Chargebacks911, eConsumer Services and Global Risk Technologies, said chargebacks are hurting both merchants and consumers and companies need to have in place safeguarded payments practices. “The rate of expected losses for retailers due to card-not-present fraud is expected to amount to $130 billion by 2023, as credit card issuers and retailers are desperate to provide the consumer with a seamless customer service experience,” Eaton-Cardone said, while cautioning merchants “to stop their ‘blind-eye’ approach.”
“Credit card issuers must exert diligent investigations and adjunction when consumers demand chargebacks, instead of catering to them as a concierge service,” Eaton-Cardone said, adding that without this exertion, “consumer bad behavior will increase, disowning legitimate purchases on the e-commerce merchants and a personal consequence for the consumer — an exponential increase in prices for products and services.”
Looking at the statistics, Eaton-Cardone found that amid the total amount of illegitimate chargebacks that occur in the market, just 18 percent of the 80 percent of retailers who file a dispute actually win. “For example, Facebook was at an all-time revenue high when children were using their parents’ credit cards online to purchase Facebook games, often without parental awareness or consent,” she noted. “This pattern caused chargeback rates to reach 9 percent —18 times the standard maximum rate for online businesses, and four times the ‘red flag’ threshold for the Federal Trade Commission.”
Eaton-Cardone said this form of “friendly fraud” occurs when a consumer “files a baseless chargeback, in effect disowning a legitimate purchase.” She also noted that chargebacks are harmful to innovation, citing a recent study by Kount that found 42 of digitally mature businesses polled were having trouble innovating because they had to focus on dealing with e-commerce payment fraud.
In response, Eaton-Cardone is urging retailers and brands to stop “enabling consumer’s bad behavior” by deploying “a tactical approach to contest all unwarranted chargebacks.” This requires putting into practice “consumer-friendly chargeback prevention tools,” which include providing 24/7 customer service, answering phone calls within three rings and making return policies “easily accessible from every page of your web site,” among other tactics.
Eaton-Cardone also noted that there’s an “overarching sense of entitlement” that is not “just found in the context of billing disputes. In today’s consumer culture, it’s everywhere.”
“This is business, not sociology,” she added. “One of the most significant issues confronting the payments industry in 2020 will be whether the industry stands against any narrative placing card issuers in a concierge role. By changing business practices to protect company assets, it will lead to a decrease in unethical chargebacks, a much easier approach than trying to change the ingrained consumer behavior.”