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44% of shoppers have filed a chargeback in the last year, straining retailer finances

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As the cost of living crisis grows, retailers are being hit by growing numbers of credit card chargebacks as shoppers change their minds – damaging cash flow and hitting revenues.

According to data from IMRG and Justt, 44% of shoppers have filed a credit card chargeback in the last year, the most common reason for this being that the goods were not received. With the cost of living crisis worsening, IMRG is warning that there could be an increase in the number of credit card disputes made against retailers, as customers commit ‘liar buyer’ fraud, or dispute items they later regret buying.

Yet, a quarter of respondents said that they have filed or considered filing a chargeback not due to a problem with the item, but instead because they disagreed with the company’s values or policies. This adds a further wrinkle to the retail relationship as customers find ways to retaliate financially against companies beyond the purchase decision.

However, retailers are being given the chance to rectify consumer claims first. Reassuringly, the majority of UK consumers (70%) would turn to the retailer first, to give them the chance to rectify a problem, before making a credit card dispute about an item. This allows merchants a window of opportunity to address the issue before the bank or credit card issuers take on a chargeback. In fact, most customers will wait 4-5 days to receive an item before filing a chargeback, whilst many would wait longer.

How can retailers avoid chargebacks?

According to the research, 60% of customers said that a generous returns policy would make them less likely to file a chargeback against a merchant in the first place. Retailers could therefore consider enacting a longer returns window as one tactic to prevent the financial losses of credit card chargebacks.

Andy Mulcahy, Strategy and Insight Director, IMRG, says: “There is growing evidence that people are looking to save money however they can, from bundling up orders to avoid paying for delivery twice to returning more items than they did previously. It seems likely that, given the pressure on discretionary spend, we may see a reduction in shopper patience in instances where the experience doesn’t match their expectations, which could lead to an even greater proportion issuing chargebacks.”

Roenen Ben-Ami, Co-founder and Chief Risk Officer, Justt, adds: “The survey shows that a near majority of UK customers not only understand the chargeback process, but have actively used it to dispute transactions. That figure will only grow during a time of global belt-tightening. To stave off significant revenue losses, merchants must not only rethink their logistics and return policies to preempt chargebacks, but also put in place proper resources and technology systems to manage disputes effectively.”

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