Customers probably don’t think about the end retailer when they put a chargeback in motion.

Chargebacks, aka payment disputes or forced transaction reversals, have always been annoying for restaurant and retail companies. To do the work, make the sale and send your products out the door only to throw it all away is vexing. When the historic average was 0.01 percent of restaurant sales or 0.5 percent in retail, it’s a cost of doing business. Not anymore.

The 2020 confluence of digital sales, economic hardship and ease of making a chargeback has turned an irritating issue into a near crisis. According to Monica Eaton-Cardone, co-founder of Chargeback911, chargebacks are out of control and up more than 90 percent.

“I think in the wake of COVID, we’ve seen a lot of structural changes and a lot more chargebacks,” she said.

On top of the big macro effects, there are plenty of other systemic issues. For one, consumers are used to instant gratification, so any dispute trends toward nuclear. Missing barbecue sauce? Chargeback. Slow delivery? Chargeback.


Monica Eaton-Cardone

The banks play right along because serving their customer means making valid chargebacks easier. They even give banking customers large windows to make a chargeback. It used to be about 30 days, now it’s as much as six months. Eaton-Cardone said it just takes a couple clicks and poof, any transaction in the last six months can become a chargeback and it’s the retailer’s problem to solve.

Therein lies another issue: Banks handle chargebacks differently. Some send an email, others send a letter (yes, a physical letter in 2021) or even a fax (get your parents to explain what that is), and others rely on the merchant checking in on their account. In some cases, Eaton-Cardone said banks requires a response within just three days.

For anyone wondering if the move to chipped technology helps here, it doesn’t. The move actually amplifies the issue. Chip security was meant to make in-person transactions more secure. It offloaded a lot of liability for fraud onto the retailer, including fraudulent digital transactions.

If all that wasn’t enough, the digitation of everything has led to even more of what Eaton-Cardone calls “friendly fraud”—purposeful transactions customers just don’t want to pay for. When they get away with one, they tend to do it again.

“It’s an illegitimate chargeback that if not refuted, it’s 50 to 60 percent of the time that the same customer will file another fraud chargeback in 60 days,” she said.

While 2020 full year numbers are still coming out, she said platforms like DoorDash, Grubhub and Uber Eats tend to put another layer of obfuscation between the customer and the retailer. Customers, it seems, don’t think the end restaurant or retailer is hit by a chargeback, but they certainly are.

What’s a retailer to do? Eaton-Cardone said she and other providers have software that can help. For those that don’t want more business software, it means taking the time to watch all those accounts, the mailbox and the fax machine. Even if the chargeback rate remains in the annoying-but-tiny range, it should be tackled. As Eaton-Cardone said, when a legitimate issue with chargebacks pops up, a vendor with a history of multiple, unchallenged claims will look like a poorly run company when they do dispute a chargeback.

If chargebacks continue to rise, Eaton-Cardone said she’d like to see some more business-friendly regulation.

“I think the easiest thing to solve the problem is just to allow merchants the same privilege that consumers have. Imagine what would happen if merchants were able to file a chargeback,” she said.

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