Justt, the chargeback mitigation pioneer, has unveiled a new study pinpointing a worrying trend in consumer chargeback behaviors impacting merchants in the United Kingdom and the United States. The research shows that over 75% of respondents in both countries lodged at least one credit card payment dispute in the period from May 2022 to May 2023. This marked a double-digit rise, compared to the previous year, and underscores a compelling call to action for merchants, as they grapple with the intricate and increasingly challenging task of transaction dispute management.
The survey also sheds light on serial chargeback behaviors on both sides of the Atlantic, defined as individuals filing 6 or more chargebacks per year. Despite a decline in the United States, the proportion of individuals frequently resorting to chargebacks remains significant, decreasing from 18% to 12% within a year. In stark contrast, the United Kingdom has witnessed an astonishing 8-fold surge in such activities, with the frequency of consumers engaging in serial chargebacks soaring from a mere 3% to a staggering 28%. The data suggests a distinct shift in UK consumer behavior, becoming noticeably ‘trigger-happy’ in using chargebacks, whether justified or not –– a trend previously observed predominantly in the US.
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The proportion of U.K. consumers who have filed a travel chargeback, for instance, more than doubled to 36% over the last 12 months, while the share of British consumers who filed a gaming chargeback also more than doubled to 49%, now surpassing that of consumers across the pond. Systemic issues with order fulfillment have played a role in escalating this reliance on chargebacks among British consumers, who have reported heightened dissatisfaction stemming from widely acknowledged problems with supply chains and limitations in labor capacity. Additionally, the 2023 survey identifies a surprising 10 percentage point growth in UK customers engaging in chargebacks for political reasons.
Aside from emphasizing the importance of a robust refund policy and a customer-centric sales journey to address the friendly fraud challenge, the 2023 survey underscores the pressing need for continued consumer education. Despite the increasing popularity of chargebacks, a substantial portion of consumers still lack awareness of the way the payment dispute process is supposed to function. This knowledge gap presents an opportunity for merchants and payments industry stakeholders to bridge the education deficit and empower consumers to make informed decisions.
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Another significant finding in the report revolves around evolving consumer attitudes toward cryptocurrency and Buy Now, Pay Later (BNPL) services. While the growth rates of these novel payment methods have slowed due to the current economic pullback, they continue to experience stable adoption rates. However, this success also warrants caution, as returning growth signals a potential surge in chargeback volumes. Proactive efforts are required to mitigate chargebacks related to BNPL and fiat-to-crypto transactions to maintain financial stability and customer satisfaction levels.
“As the challenges posed by rising credit card chargebacks and friendly fraud continue to intensify, industry stakeholders must collaborate and take targeted action to safeguard not only their revenues, but also their reputations,” said Roenen Ben-Ami, Justt co-founder and Chief Risk Officer. “By addressing the issues highlighted in the survey, merchants can work towards restoring customer trust, reducing chargeback volumes, and securing their financial well-being.”
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