Living in Interesting Times: Key Takeaways from the 2022 Chargeback Field Report

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Merchants love predictability. Knowing what to expect from the market allows for solid planning and reliable, stable growth. Of course, predictability isn’t something we’ve been able to enjoy that much lately.

Regarding payments technology in 2022, you could say “inconsistency” is the key word. Others might say “confusion,” but it could be considered a matter of perspective. Even setting aside the obvious factor of Covid-19, the last year saw a tremendous amount of upheaval in the payments space. This fact is reflected in the results from the new 2022 Chargeback Field Report, published by Chargebacks911.

Uncertain Future for New Payment Channels

Payment options are changing, and institutional players in the payments space are not always great at keeping up with change. Look at the range of payment options available to buyers, for example.

Cryptocurrency adoption jumped 50% between 2021 and 2022. While the adoption rate remains comparatively small, it’s hard to ignore such rapid gains. So-called “buy now pay later,” or “BNPL” options also saw substantial growth. More than one-quarter of respondents said they now offer BNPL options to consumers.

BNPL and crypto payments offer some distinct advantages over traditional payments. Neither payment option involves a credit or debit card. Therefore, these transactions are not susceptible to chargebacks. That said, they’re still not immune to threats like account takeover. This can create even bigger problems, if cardholders have no way to recoup losses after a fraud attack.

Standardization is Lacking

We don’t have to look very far to see signs of inconsistency and a lack of standardization in the payments space. One of the key insights from the study, for instance, zeroed in on the use of the word “chargeback” itself.

Visa overhauled their chargeback processes back in 2018 with the rollout of the Visa Claims Resolution initiative. One of the changes they made to their ruleset was the elimination of the term “chargeback;” now, all cases in the Visa network are referred to exclusively as “disputes,” regardless of process stage.

Slightly more merchants embraced the new terminology in 2022, as compared to last year’s survey. However, the largest share of respondents said they used both terms interchangeably, regardless of card network rules.

First-Party Fraud is Booming

Uncertainty breeds opportunity for fraud and abuse…especially in payments and finance.

Even as the Covid crisis winds down, merchants are still seeing significant jumps in first-party threats like friendly fraud. Two-thirds of merchants reported an increase in friendly fraud over the last three years, and another two-thirds of merchants said it was a “moderate” or “significant” concern. Despite this, a minority of merchants said they’re addressing the problem effectively.

Looking at merchants with more than $100M USD in annual revenue, for instance, we see that just 10 percent felt they were successfully managing chargebacks. This doesn’t bode well; if cardholders can get away with first-party fraud, they’re much more likely to make it a habit. Merchants need to take this threat seriously, and deploy the necessary strategies to fight back.

Details about these and other fascinating insights are available in the 2022 Chargeback Field Report. Click here to view the full study.

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