Why are Chargebacks a Big Deal?
Chargebacks hurt everyone. High chargeback volume (basically more than 1% of 1 month sale volume) is a particularly expensive problem. For the merchant’s bank, chargebacks become a tedious diversion of resources and decrease profits due to the bank’s high volume-low profit margin operating structure. Merchants too, devote a substantial amount of their time managing high chargebacks rather than operating their businesses. The card issuer’s bank and cardholders with disputes also exhaust resources handling chargebacks. Chargebacks take time and cost money to process. They can indicate risk exposure for a particular merchant, lead to cardholder and merchant frustration, and ultimately cause the termination of a merchant account and MATCH listing of the merchant and its principal. Prevention of chargebacks is a major industry concern.
