UK Merchants Must Adopt a More Aggressive Stance in the Fight Against Rising Chargebacks

eCommerce dispute

The pandemic has given eCommerce adoption an unprecedented boost these past two years, but alongside the surge in online shopping and increase in the number of new customers worldwide is an uphill battle merchants are facing in mitigating the unexpected rise in transaction disputes and chargebacks.

Data from a recent PYMNTS report shows that 39% of eCommerce shoppers in three countries — Australia, the United Kingdom, and the United States — say they are initiating more disputes today than they did before March 2020, with 24% of them having disputed charges within the last 12 months.

Read the report: Tackling the Chargeback Surge: How eCommerce Merchants Are Doubling Down On Disputes And Chargebacks

Produced in partnership with global collaboration-based technology provider Ethoca, the report also revealed that 12% of consumers in these three countries dispute charges at least once each month, forcing local eCommerce merchants to reconsider how to tackle the financial and logistical pressure disputes and chargebacks can put on their bottom lines.

Read also: Online Disputes Are Surging — What Merchants Are Doing to Fight Back

Of the countries surveyed, the U.K. showed the highest growth in the number of consumers shopping online in the last year compared to before the pandemic (58.4%, 25 million individuals), followed closely by the U.S. (53.8%) and Australia (46.8%).

Among these U.K. consumers, almost 13% said they shop online once a month — more than their counterparts in the U.S. and Australia — while close to 62% of consumers revealed they make more than one eCommerce purchase per month.

Read more: Merchants Aim To Battle Back Chargebacks Amid Digital Commerce Surge

When it comes to reasons for initiating a dispute, service errors were a common reason U.K. eCommerce shoppers initiated a dispute, with about 74% of them disputing at least one charge in the last 12 months because of this — the second highest rate among the three countries.

Confusion about some aspect of their transaction, legitimate fraud attempts and first-party misuse were other common reasons U.K. shoppers cited for their complaints.

Based on these findings, it is not surprising then that nearly 40% of U.K. merchants say they have seen their chargeback volumes increase since the onset of the pandemic. Even more problematic is the fact that 47% of these retailers — the highest of the three countries — say that managing chargebacks is more of a struggle today than it was before March 2020.

Learn more: How High-Tech And High-Touch Can Help Merchants And FIs Grapple With Chargebacks

On average, however, U.K. eCommerce merchants have fared the best by far, having seen an increase in chargeback volumes of only 3.9% in the last 20 months, compared to the U.S. (11.3%) and Australia (7.3%).

But that doesn’t change the fact that this remains a key challenge and U.K. merchants need to double down on more effective chargeback management strategies to limit its negative impact on their business.

The good news is that 78% of U.K. retailers have either already invested, currently invest in or plan to invest in prevention strategies going forward.

And like their counterparts in the U.S. and Australia, U.K.-based eCommerce merchants also plan to leverage other strategies to ramp up chargeback prevention, including pouring more internal resources into the fight against rising chargebacks, partnering with a third-party chargeback solution provider, or changing their current provider and planning to outsource chargebacks to third-party providers entirely.

Across all strategies, however, the study showed that business owners in the U.K. were the least eager about using any of the three plans to manage chargebacks.

But that will have to change moving forward, and U.K. retailers must adopt a more aggressive stance in mitigating the growing challenge of transaction disputes and chargebacks to avoid the risk of having them drain their resources and reduce their bottom lines significantly.