Nettlesome Chargebacks Prove Vulnerable to Mitigation Efforts, a Report Finds

There’s a bit of apparent good news when it comes to chargebacks. The chargeback-to-transaction ratio decreased from 1.94% in 2020 to 1.52% in 2021, and is also down from the remarkable 3.76% seen in 2017. That’s according to the fourth annual “The Year in Chargebacks Report” from Midigator LLC, a chargeback-management platform.

The decrease from 2017 to 2021 is a 59.6% reduction in the ratio. “The drop in the chargeback-to-transaction ratio proves that ongoing efforts and professional expertise help prevent chargebacks with greater accuracy,” the report says. “Merchants in this study were actively managing disputes and attempting to keep risk in check.” The 2021 data was generated from 81 million transactions, 1.3 million chargebacks, 658,000 prevention alerts, and 206,000 order-validation cases, Midigator says.

American Fork, Utah-based Midigator’s research found that merchants employing multiple chargeback-prevention services were able to stop up to 50% of disputes from becoming chargebacks. Of merchants actively engaged in chargeback prevention, 63.9% used multiple services.

This strategy is not without risks, however. “The biggest challenges of a multi-layer prevention strategy are overlap—single dispute cases that involve multiple resolution attempts—and leakage—prevention attempts that are unsuccessful at stopping the chargeback,” Midigator says in the report.

And, of the disputes merchants encountered, 79.18% were fraud-related in 2021, up from 76.67% in 2020 and 62.1% in 2017.

This type of data can be invaluable in helping to prevent chargebacks, Midigator says. “Success derived from assumptions and guesses is only temporary,” Corey Baggett, Midigator chief executive, says in a statement. “But data-driven decisions solve problems at their source, yielding sustainable results that improve over time.”