Calculate how much your chargeback’s costing you?

“How much do chargebacks cost?” That’s one of the most commonly asked questions we get here at Chargebacksexpertz. The answer can be trickier than you probably expect, though.

Many factors decide the number of monthly chargeback grants a business will face. The same applies to the costs associated with them.

In this article, we’ll look into the costs commonly associated with chargebacks. We’ll also examine some surprising graph about the cost of chargebacks, and also gives some helpful tools and information to help you reduce the effect of chargebacks on your business.

First, let’s start with the basics.

Causes of Chargeback Costs

When you are targeted by a chargeback, you lose the income generated by sale. However, the costs which come with chargebacks extend far off the sales revenue. They include:

• Merchandise Costs

A cardholder who files a chargeback has little inducement to return the item in question.

• Overhead Costs

Any costs related to materials and processes i.e. hosting, processing, interchange, shipping, stocking, etc.

• Marketing Costs

Whatever you spent to promote the item to generate more income. This can include social media ads, print ads, and more.

• Chargeback Fees

The bank assesses a fee to cover their costs. This fee is non-refundable, even if you fight the chargeback.

What do all these chargeback costs covert to in terms of real dollars? It depends on the nature of business you pose, what you sell, how much it costs you to operate, and which banks and processors you utilize. However, internal data from Chargeback expertz suggests that, by 2023, approx chargeback will cost $191, based on a $90 average disputed transaction.

Adding Up the Cost of Chargeback

These chargeback costs add up immediately, and they impact everyone throughout the structure of the payments. Merchants take the mainly of the hit, but banks also lose tons of money every year due to disputes.

To provide the most appropriate impression we can, we’ll flesh this section out with more numbers based on Chargebackexpertz internal data.

Global chargeback volume has reached up to 615 million in 2021, according to data collected from Mastercard. So, if we do some basic math:

The average chargeback cost is up to 191$ X 615 million (Projected Global Chargeback Volume) =$117.46 billion TOTAL COST

That’s absolutely correct: $117.46 billion by coming next year. If we break this up between banks and merchants, we can project that merchants will suffer nearly $79 billion of that loss.

Also, keep in mind that the number of chargebacks filed is lesser than the number of potential disputes. Due to alerts and issuer write-offs for low-value transactions, only 76% of disputes progress to the chargeback stage.

Why Chargeback Costs are increasing?

We’re looking at a 10.4% increment in chargeback losses between 2021 and 2023. But why?

Again, there is no single answer to the question. Multiple forces are contributing to the increase in chargebacks.

Fraud is obvious a biggest factor. A wider approach to cardholder data, coupled with the difficulty involved in verifying card-not-present buyers, has resulted in widespread issues with online fraud day by day which is touching the cloud day by day but, what these figures all fail to convey is the effect friendly fraud has on the cost of chargebacks.

Friendly fraud is growing like a virus in the metric in the bunch. Roughly six in ten chargebacks filed in 2023 are expected to be cases of friendly fraud.

But, now that we understand the numbers a bit better, let’s talk about how chargeback costs are affecting your business specifically, these chargebacks eat up the business and make it hollow from inside. Try using this Return on investment calculator to get a basic idea of what chargebacks are costing you in an average month.

What about the Intangible Chargeback Costs?

Here’s another astonishing fact: did you know that it takes 12 positive customer experiences to make up for one negative experience with your brand?

Have you heard that the average American tells 15 people when they’ve had a poor customer service experience?

These are just two examples of intangible chargeback costs. These figures are even tougher to quantify. In most cases, there’s no way to draw an unbreakable connection between these problems and their result. As a result, most merchants won’t even realize these issues exist and indirectly affect their business.

Instant Tips to Reduce Chargeback Costs

Did you know that there are many basic routines you can adopt that might help prevent disputes and decrease your chargeback costs?

It’s right. Restricting the number of hidden leakages you have built into your systems and practices is a wise best practice. From optimizing customer service to boosting fraud prevention, here are five simple ideas that can help you control the cost of chargebacks:

BE A CUSTOMER SERVICE PRO

Avoiding merchant error is a difficult task you might see regarding chargebacks. But, ultimately, it can be fruitful. You can avoid many chargebacks by making it quicker for customers to reach out to you. This means providing prompt, helpful answers to all phone, email, and social media inquiries, and making sure your contact information is easily seen by them.

UP-FRONT POLICIES WIN

You don’t want any of your policies or practices to be viewed as a bad surprise by customers. Be clear and prompt with all policies, especially those related to fees or charges customers are likely to encounter. Tax, shipping and handling, and return policies should be listed and easy to reach out to your customers.

PAY ATTENTION TO THE DETAILS

You’re billing descriptors and other relevant merchant information should be recognizable to your customers. Many chargebacks are filed simply because merchants failed to add one of these identifying details, as cardholders are unable to recognize transactions and might detect they’re fraudulent.

FIGHT FRIENDLY FRAUD

As we mentioned above, friendly fraud is one of the most common things for chargebacks. It’s also the trickiest, by far. You have to pay close attention to chargeback reason codes, keep an eye on excellent records, and respond quickly to false chargeback claims. This will allow you to fight back when appropriate through the representment process. Only the expert’s team can figure out these sickness of the process.

KNOW WHEN TO ASK FOR HELP

Sometimes the difference between a high chargeback ratio and soaring chargeback costs knows when you need help. Chargeback management companies exist for this very reason, and you must understand when in-house management is insufficient for your business’s needs.

If it seems like it’s getting harder to manage chargeback costs every year… that’s because it is.

When it comes to the true cost of chargebacks, prevention proves to be the best medicine. You can limit the hidden charges and aftereffects with careful practices and clever planning. Or, you can reach out to the experts and let them handle it for you.

Chargeback Expertz

Giving and holding the most effective team to encounter and smell the chargebacks from far far away is the specialty of Chargeback Expertz. Commanding over a decade as a leader in the payments industry, Chargebackexpertz is amazingly placed to help your business navigate the cost of chargebacks and save you time and income. Give us a call and learn how much you can save today. We are open and awake for our customers anytime for their help.