Welcome back to the FlashBanc blog, where we handle all merchant processing news, tips, and anything industry related. Our topic this week is about the recent trend of chargebacks. If you haven’t experienced this already, then I’m sure you may have heard about it briefly. So, let’s discuss why chargebacks are projecting to skyrocket in 2020 and the future.
What are Chargebacks?
A chargeback is identical to a refund. Say a card holder asks a bank or credit card provider to return funds back to their bank account, this is called a chargeback. It is ultimately up to the bank to decide whether or not to grant the chargeback. Chargebacks also waste money, time, resources, and services. If you want a deeper dive into what a chargeback is, CLICK HERE for our Chargebacks blog.
Trends and Future
Chargebacks in 2019 accumulated an astounding $585 million dollars, and 2020 is already projecting to exceed that substantially sitting at $690 million. According to Aite Group estimates, the future isn’t looking good and is only projected to increase to $794 million in 2021, $913 million in 2022, and $1.05 billion in 2023. The scary part about all of this is that the main source used to stem from fraud, now it is coming from non-fraud transactions, also known as “Friendly-fraud”.
Reasons for Skyrocketing Projections
There are many reasons for the dramatic increase in chargebacks just this year. We can start off with the obvious reason which is because of Covid-19. Covid-19 has really affected the travel & entertainment industry as they usually take orders in advance to providing their services. This, in return, trickles down to the credit card issuers who have travel rewards cards, as they are also seeing a substantial increase in chargebacks. Gyms are also struggling hard from Covid-19 as the economy froze and people are cancelling their memberships in significant numbers. Besides the fact of Covid-19, another reason for the substantial increase is because of the EMV chips now used on almost every card. Since the EMV chips have been implemented, fraud has increased tremendously online.
A chargeback is described as a card holder requesting a return of funds, and the decision is left to the bank. Chargebacks are only going to increase throughout the years. In 2020, due to Covid-19 and fraud shifting to mainly online, chargebacks are projecting to hit $690 million. It’s imperative for merchants to learn how to dispute chargebacks that don’t qualify. CLICK HERE to find information on how and when to dispute chargebacks in our other blog. We hope everyone is staying safe and pushing through these hard times. Sales partners, check out the FlashBanc opportunity and ChargeIntoTheFuture.