As a result of COVID-19, increasing numbers of consumers have had little or no choice but to turn to online shopping platforms for all their non-essential goods. In fact, one study reports there has been a staggering 74% growth in digital purchases.

While consumers are benefitting from this convenient experience, many retailers have been caught unawares by a rise in chargebacks stemming from various types of fraud. It’s true that this isn’t a new story, but its presence in our increasingly digitalised world is becoming more prevalent. How much more? According to Feedzai’s Quarterly Financial Crime Report, there has been a 60% rise in fraud rates and a 5.5% increase in the value of each attempted fraudulent transaction.

What types of fraud are impacting chargebacks?

Diving deeper into rising fraud trends, there are certainly some key culprits – account takeover, for one, is a growing issue for retailers and their customers. Cases soared to 282% between Q2 2019 to Q2 2020, with ATO rates for ecommerce businesses which sell physical goods jumping a massive 378% since the start of the COVID-19 pandemic.

Unsurprisingly, 66% of all transactions originated on mobile devices in the first half of 2020, up from 20% in early 2015. This brings its own set of issues as mobile commerce generally attracts higher rates of fraud. SIM swaps, for example, present ample opportunities for account takeovers, and only in February cybersecurity researchers announced the discovery of malware that could exploit a vulnerability in Google Authenticator, a popular 2FA app for Android. 

Elsewhere, we’ve seen fraud attempts thrive through the likes of digital gift cards and buy online, pick up in store (BOPIS) shopping, both of which are extremely popular in a holiday season still under the influence of COVID-19. In particular, BOPIS fraud increased 55% YoY in the first half of 2020.

Why is this all causing more chargebacks?

A growth in criminal fraud sends genuine chargebacks on an upward spiral, since defrauded consumers will dispute to get their money back from the retailer who processed the order. Other issues, such as trouble with deliveries, products and staffing, have added to this problem, too.

At the same time, instances of fraudulent chargeback claims (aka friendly fraud) more than doubled between January and June 2020. This is because it is now easier to commit than ever before. Consumers are cloaked by anonymity when shopping online, and merchants aren’t always present at the point of exchange to confirm if goods arrived safely.

Sadly, several consumers hit by the financial pressure of the pandemic have also turned to friendly fraud to recoup money spent on previous sales, further contributing to its rising levels.

How can I prevent chargebacks?

The good news is there are tools and solutions at retailers’ disposal to assist in the prevention of chargebacks, including implementing robust identification and verification processes. Here are three steps that we swear by:


The first step in any strategy should be investigating means of prevention. Retailers are likely to see fewer chargebacks if they provide a high quality customer service – because, quite simply, happy customers are much less likely to instigate chargebacks.

Effective ways to do this include keeping customers informed about their deliveries, making cancellations easy – especially when it comes to subscription services – and by responding to customer queries quickly. (Top tip: Retailers should always inform customers of how long they can expect to wait for a response and stick to it. For example, within 48 hours.)

There is also an opportunity to refund customers proactively if they are unable to meet the expected delivery date/agreement. A responsive customer service function of this sort goes a long way towards consumers feeling like their aftercare is just as important as the initial purchase.

Using a chargeback alert programme is best practice for preventing chargebacks as it allows issuers to notify the retailer when a cardholder has disputed a transaction – giving them the chance to proactively provide a refund.


Knowledge is indeed power as they say, and a key part of preventing chargebacks in the future is understanding the cause of each claim made today.

Chargebacks are caused by either retailer error, criminal behaviour, or friendly fraud. But if, for example, a retailer refunds a friendly fraud claim under the pretence of an internal issue, they will not only lose out on the product, the cash, and the admin fees of processing a chargeback, but they will put a target on their back for further friendly fraud. This is since 50% of cardholders who successfully commit friendly fraud will attempt it again within 60 days.

If retailers keep on top of friendly fraud by going through the representment process, however, it shows processors, issuers, and fraudsters that they’re a tough nut to crack. On the flip side, if a retailer argues a genuine claim, it can end up in disappointed and lost customers.

It’s a tight line to walk, but it’s worth the hassle in order to prevent the huge revenue drain of chargebacks and friendly fraud – it costs the industry around £80 billion a year in associated costs. A good start is to mend the errors causing genuine issues, such as fixing product descriptions to prevent claims that the item was not as described. This will make friendly fraud cases somewhat easier to spot.


Retailers need to be agile and adapt if they are to crack down on the threat that chargebacks pose. Part of this means improving data management and responsiveness once a dispute is raised.

We advise keeping clear transaction data to hand – everything from card numbers, CVVs, the customer’s name to the date of purchase and delivery can provide evidence that a chargeback is unwarranted. Then, being ready to go with this evidence at the drop of a hat. This is especially important now since recent rule changes from the card schemes have reduced the timeframe to dispute each claim.

This agility and invested time/resources into preventing all chargebacks, plus identifying then disputing fraudulent claims, will ultimately protect huge chunks of revenue that is currently being lost. There is also plenty of support out there to help with doing this.

As they say you should ‘begin as you mean to go on’, so let’s all work together in 2021 to fend off chargebacks and reduce the mass amount of fraudulent claims!