Chargebacks, or a charge returned to the payment card after a customer successfully disputes an item on their account statement, is a significant headache for SMBs in the B2B space. Chargebacks in low quantities are generally harmless, but your business is at risk if they happen too often. This is because when chargebacks occur, the company not only misses out on the sale but must pay a fee to the acquiring bank ranging from $20 to $100.
Chargebacks are also known as friendly fraud because the consumer actively makes the charge and dishonestly disputes it with a believable claim. This disadvantages SMBs because they have to work with banks and cater to requests, even when they’re false. Below are three things you need to know about “friendly fraud to protect yourself and the business you’ve built.
1 in 4 consumers who file chargebacks admit to friendly fraud
As many as 25% of consumers know they are committing friendly fraud, according to a new Q4 2022 report from Sift, the leader in Digital Trust and Safety. Sift also found that chargeback dispute rates have risen over 35% since Q1 2022, a massive business loss.
Fraud claims increase as the economy dips
The economy slipped in late 2022 and early 2023 as layoffs and interest rates increased to help control inflation. Some consumers are trying creative solutions to reduce monthly costs as the economy cools. Not all industries are fighting the same battle, though and it’s shown that digital goods and services, retail, and fintech face the most disputes. Right now, the top three most disputed items are clothing at 20%, subscription goods at 19%, and electronics at 18%.
Friendly fraud isn’t technically illegal activity
When we think of illegal activity, we may picture events like stealing someone’s identity or assets or trying to defraud another party. While chargebacks are annoying, they aren’t considered illegal activity because the cardholder is thought to be unaware of the purchase and current circumstances.
If you have too much on your plate and don’t have time to worry about friendly fraud, be sure to reach out to me at Richmond Financial Services. I provide innovative payment processing strategies for the home heating and fuels industry that help you enjoy perpetual savings. Get started by scheduling an appointment here or calling 617.843.5700.
I look forward to working with you!
