Holiday Season Chargebacks Guide

November 26, 2024

Table of Contents

  1. What Causes Holiday Season Chargebacks?
  2. How Can Merchants Prevent Holiday Season Chargebacks?
  3. Leveraging Data Insights
  4. Getting Help With Holiday Chargebacks

The holiday season brings a surge in sales for merchants, with e-commerce continuing to dominate as shoppers increasingly turn to online platforms for their purchases. This year, Black Friday set a new record, with consumers spending over $10.8 billion—a 10% increase from last year, according to Adobe Analytics.

For e-commerce merchants, the holidays present significant opportunities for revenue growth, but they also come with challenges.

An influx of new customers and high transaction volumes often lead to spikes in fraud, chargebacks, and false declines, creating complications that can persist well into the new year. Preparing for the holiday rush isn’t just about meeting demand; it’s also about anticipating and addressing the risks that come with it.

Record-breaking sales are exciting, but without the right strategies in place to manage transaction processing, customer service, and order fulfillment, the aftermath can be costly. Merchants who take steps now to address these challenges can start the new year on a stronger footing.


What Causes Holiday Season Chargebacks?

The holidays are the busiest time of the year for most merchants, so it only stands to reason that a greater number of chargebacks follows in the period immediately afterward. Increases in fraud, shipping delays, and other issues can also lead to more chargebacks.

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 or unaware spouses who fail to recognize the charges on their account statements, and still others come from shoppers who overspent and pursue chargebacks out of buyer’s remorse.

During the holiday season, some fraudsters exploit the opportunity to commit fraud more easily. With numerous gifts being bought online and sent to addresses other than the buyer's, it may become easier for true fraudsters to get away with using someone else's credit card for purchases. Additionally, friendly fraudsters might assert that their purchase being delivered to a different address serves as clear proof of fraudulent activity.

How Can Merchants Prevent Holiday Season Chargebacks?

First, it’s essential to have sufficient resources allocated to dealing with the increased demand on sales, fulfillment, and customer service. It’s also more important than ever to employ effective anti-fraud tools.

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.

Leveraging Data Insights

Data can be one of the most powerful tools for merchants aiming to reduce chargebacks during and after the holiday season. By analyzing historical trends and transaction details, businesses can identify potential risks and take steps to address them before they escalate into disputes. Here’s how merchants can leverage data insights effectively:

Analyzing Holiday Transaction Data

Holiday transactions tend to follow unique patterns that differ from the rest of the year. By examining previous years’ data, merchants can pinpoint common issues, such as:

  • High-Risk Products: Identifying items that historically generate the most disputes.
  • Fraud Trends: Recognizing spikes in fraudulent transactions during specific periods.
  • Geographic Risks: Flagging regions or countries with elevated fraud or dispute rates.

This analysis helps merchants prepare for similar patterns in the current season and adjust their operations to minimize risks.

Making Proactive Adjustments

The insights gained from data analysis should translate into actionable strategies, such as:

  • Strengthening Fraud Detection: Customize rule sets for fraud detection tools tailored to flag high-risk transactions while avoiding false positives..
  • Improving Customer Support: Allocate extra resources during high-traffic periods to handle complaints or refund requests promptly.
  • Monitoring Real-Time Trends: Use real-time analytics to identify emerging fraud patterns or customer complaints, allowing for immediate corrective actions.

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.