Security & Fraud

How Merchants Can Combat Chargebacks

As fraud continues to grow in the online space, so, too, does the likelihood for eCommerce merchants to endure the burden of chargebacks.

To help businesses address this increasing problem, today, payment solutions company Vesta Corporation has released a white paper titled “Overcoming the Chargeback Challenge.” In it, Vesta explores how recent shifts in online and mobile shopping trends have led to a rise in card-not-present (CNP) fraud.

Sharing Forrester Research data predicting that, over the next five years, eCommerce sales will grow at a 10 percent compounded annual rate to reach $480 billion, the Vesta white paper highlights the resultant critical nature — and potential cost — that changing consumer behavior, chargeback management and fraud prevention pose to online merchants. As it stands already, Vesta points out (referring to data from Javelin), in-house chargeback management and fraud-prevention efforts account for between 13 to 20 percent of eCommerce retailers’ operational budgets.

“Chargeback management and fraud prevention is a growing operational burden as merchants scale to meet consumer preferences and demands,” stated Tom Byrnes, chief marketing officer at Vesta, in a press release. “However, as businesses scale up and take stock of how much of their non-revenue generating budgets are being spent to manage fraud and chargebacks, they should conduct a cost-benefit analysis of hiring and training dedicated in-house staff versus hiring an experienced third-party solutions provider.”

One of the recommendations that Vesta includes in its white paper for merchants looking to manage their chargeback burden is to outsource the task to a third party; the document also lays out guidelines for selecting a solution provider for that purpose.

“Our research revealed that almost two-thirds of physical goods merchants believe that outsourcing fraud mitigation and chargeback management has become cost effective,” added Byrnes. “We believe working with a third-party solution provider who specializes in end-to-end management of CNP transactions will be the future for online merchants who are already at a higher risk for this type of fraud than their brick-and-mortar peers.”

 

Vesta Corporation’s white paper, “Overcoming the Chargeback Challenge,” can be downloaded here.

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