2020 Holiday Season Chargeback Guide

Table of Contents

1. What Causes Holiday Season Chargebacks?
2. How is Holiday Shopping Different in 2022?
3. How Can Merchants Prevent Holiday Season Chargebacks?
4. Getting Help With Holiday Chargebacks

During the holiday season, merchants are hard at work preparing for the surge in sales. And more people than ever are turning to e-commerce to do their holiday shopping. That means the holidays have the potential for significant revenue gains for e-commerce merchants. Unfortunately, the following weeks have the potential for significant revenue losses.

A sudden influx of purchases from new customers is often accompanied by increases in fraud, false positives, and chargebacks, and that flood of chargebacks tends to continue well into the new year. What do merchants need to know to be prepared for the best and worst the holiday season has to offer?

While Black Friday sales were somewhat dampened this year, overall holiday sales have remained high. Increased sales are never a bad thing, but when you aren’t ready to take on the increased workload on your transaction processing, customer service, and shipping operations, problems can occur—the kind that often turn into chargebacks down the road.

Nothing sours a good holiday season like a storm of chargebacks rolling in throughout January and February, and there’s no better time than now to make the preparations that can help you avoid them.

There are certain aspects of the holiday shopping season that can lead to specific types of chargebacks occurring, and this can cause a merchant’s chargeback rate to spike disproportionately to their increase in sales volume.

True fraud chargebacks often surge during the holidays, and that’s because fraudsters are more likely to strike during the holiday shopping season. They’re deliberately taking advantage of the fact that merchants are busier and less likely to closely scrutinize transactions. True fraud chargebacks are legitimate and cannot be recovered via chargeback representment, which means that the only way to fight them is to stop the fraud from happening in the first place.

The hustle and bustle of the holiday season can lead to shipping delays, miscommunications, order mix-ups, and other honest mistakes that can also be valid chargeback reasons.

Merchants who don’t have the staffing needed to deal with their holiday rush are very susceptible to these sorts of disputes.

Friendly fraud chargebacks are quite common as well. Some of it comes from purposeful cyber-shoplifters who are hoping the merchant is too busy to pay attention and fight the chargeback, others may come from forgetful shoppers who fail to recognize the charges on their bank statement, and still others come from shoppers who overspent and pursue chargebacks out of buyer’s remorse.

Some fraudsters take advantage of a unique aspect of the holiday season to commit fraud more easily. At this time of year, there are many gifts being purchased online and shipped to a different address than the buyer's. This make it easier for true fraudsters to make purchases with someone else's credit card. Friendly fraudsters can also claim that their purchase being shipped to a different address is clear evidence that fraud occurred.

Many analysts expect to see a lot of “buy online, pick up in store” and “buy now, pay later” purchases this year, and many merchants who are embracing these trends may find themselves caught up in new dispute scenarios that they haven’t previously experienced.

While awareness of holiday shipping delays has increased, many new or infrequent online shoppers may not be aware that a purchase made in early December might not arrive in time for Christmas. When a holiday-related purchase arrives too late, some customers will file a chargeback out of annoyance.

Ideally, a fraud tool should be customized to your business rather than a one-size-fits-all solution. Every merchant deals with a different set of circumstances and faces a different combination of threats. Tuning your fraud prevention to maximize detection while minimizing false positives takes time, but it's the best way to protect your revenue.

Many merchants will need to devote additional resources to customer service. Customer service inquiries should be responded to as quickly as possible and merchants should promptly resolve customer complaints.

While it may be painful to issue refunds for perfectly good sales, dissatisfied customers will often turn to their bank when unable to get a refund from the merchant, and a chargeback is far more expensive than a refund would have been. 

Customers may be forgiving of the fact that shipping services are somewhat overwhelmed, but relying on patience and goodwill will only get you so far. Customers who can’t get a satisfying response from the merchant will often turn to the chargeback process sooner or later.

The holiday season is no time to lighten up on your anti-fraud defenses, but it can be a good time to review your return and refund policies and be as generous as possible when customers want to change their mind about a purchase. In addition to being less costly, refunds can help retain the loyalty of an unsatisfied or regretful customer.

Getting Help With Holiday Chargebacks

Preparing for holiday season chargebacks can also be a good time to review your overall chargeback management strategy. If you're not fighting chargebacks effectively, you may be facing a significant and avoidable loss of revenue in the weeks to come. Having a professional chargeback management team at your disposal can help make sure that holiday revenue doesn't slip away.

Of course, any merchant who is teetering on the edge of their chargeback threshold or losing significant amounts of revenue to chargebacks can also benefit greatly from calling in the experts.

A reliable chargeback management strategy must always include proactive efforts, especially in the areas of fraud prevention and customer service, as well as a commitment to engaging in effective chargeback representment. It’s not always easy to pull all of these elements together, so don’t hesitate to seek out help when you need it.

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