The Hidden Costs of Chargebacks

People have always been told that they can take their business elsewhere if they disagree with a company’s politics or policies, but what if you could fine the company too?
by Ronen Shnidman
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Published: March 7, 2022
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The Hidden Costs of Chargebacks

Click here to download the full version of this report.

While eCommerce merchants have come to expect the standard fees levied by financial institutions in the event of a chargeback, there are in fact several additional costs associated with a customer dispute. Such variable expenses do not necessarily appear as a direct fee, so they are not as noticeable. Still, they have an impact on merchants' ability to run a business, which means that the true cost of a chargeback is far higher than it first appears.

To find solutions to the growing problem of chargebacks and their negative effect on the profitability of eCommerce businesses, merchants must gain awareness of the hidden costs involved with a customer dispute.

  • Customer Acquisition Costs: The effort and resources put into a sales conversion become unproductive expenses if a chargeback is initiated.
  • Shipping Expenses: Any shipping costs accrued to complete a sale are typically the merchant's responsibility, and for a product that did not result in company revenue.
  • Processing Fees: Financial institutions take a percentage fee per transaction to maintain the payment network, but those fees become an additional expense in the event of a lost chargeback dispute.
  • Labor Expenses: Manufacturing, customer service and chargeback dispute teams all use up valuable business resources, and those efforts are unproductive if a sale results in a chargeback that provides no company revenues.
  • Operational Expenses: Chargeback prevention, damaged return packages, and business infrastructure depreciation are all examples of operational expenses that hurt a merchant's bottom line.
  • Reputational Damage: A chargeback hurts customer loyalty and can harm relationships with financial partners, hurting a business's growth.

The true cost of a chargeback is far higher than the standard and expected chargeback fees. New solutions that can help prevent chargeback and increase merchants' win rates are needed.

For more information on what Justt can do to help you with chargeback fraud contact us. To learn more about interesting payments topics, check out the Justt blog.

Click here to learn more about the Hidden Costs of Chargebacks and download the full version of this report.

Written by
Ronen Shnidman
Ex-journalist and major fan of fintech and OSINT, I write regularly for leading industry outlets in finance and fraud prevention. Outlets I contribute to include Payments Dive, Finextra, and Merchant Fraud Journal, and I have been cited by
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