By John Stewart
Few things have thrown a spotlight on the 40-year-old chargeback process like the nation’s conversion to EMV chip cards at the point of sale, but it’s in online commerce where the problem has long plagued merchants. And now there’s evidence that these sellers may have more to fear from female shoppers than from male customers.
While women account for 58% of all U.S. e-commerce sales, they are also responsible for 76% of all online chargebacks, according to data released Friday by Chargebacks911, a Clearwater, Fla.-based company whose software helps merchants dispute chargebacks. The company says its system processes more than 200 million transactions each month.
The emergence of this gender gap surprised officials at the company. “It’s an eye-popping trend,” said Monica Eaton-Cardone, chief operating officer and co-founder, in a press statement. “Clearly, men and women have different purchasing patterns, and online companies would be wise to accommodate these behavioral differences. Too much money is at stake to ignore the problem.”
The chargeback process is designed to protect consumers by allowing them to refuse responsibility for an unauthorized charge or for cases when merchandise was not delivered as advertised. Not all chargebacks are fraudulent, but online merchants have complained for years about so-called friendly fraud, where customers will receive what they paid for but initiate a chargeback with their card issuer to collect a refund, claiming the product or service was never delivered or was not as advertised.
“Friendly fraud drives a lot of chargebacks,” says Julie Conroy, research director at Boston-based Aite Group who recently completed research on chargebacks. “I had some of the digital-goods properties tell me that as much as 75% of their chargebacks are friendly fraud,” she says.
With the onset of EMV, merchants have found themselves swamped with chargebacks stemming from counterfeit card fraud if they aren’t equipped to process chip cards. That fraud had been shouldered by card issuers but shifted to unprepared merchants with a so-called liability shift that took effect nearly a year ago and was mandated by the card networks to encourage EMV adoption.
But with online sales, a different dynamic drives chargeback trends, since e-commerce merchants have been responsible for fraudulent transactions all along. Eaton-Cardone speculates that female shoppers are likely to be choosier than men, leading to a higher likelihood that they will be dissatisfied with the delivered product. “So it’s not that women are less honest than men, but that women will utilize every available resource to resolve a shopping dispute,” she said in the statement.
Other reasons, says Conroy, could involve cases where a child who plays online games will rack up a big expense using a parent’s card. The parent, then, denies responsibility. And that parent more often than not might be the mother. “I don’t have data here, but I could see how this phenomenon could have a gender bias,” Conroy says.
Also, consumer packaged-goods companies that send merchandise to customers on a subscription basis can be vulnerable. “I’m also hearing about a rise in friendly fraud and buyer remorse related to all of these monthly CPG subscription services that are springing up,” Conroy says. “where consumers are sent a box of clothes, makeup, food, [and so on}. A lot of these services are targeting a female audience.”
Eaton-Cardone’s advice for online merchants? “If a company caters to a female-dominant demographic, they should proactively plan for chargebacks,” she said in the statement. “This means using ultra-precise language when describing products, posting up-to-date images from various angles, investing in high-end customer service, and creating a clear and transparent refund policy.”