According to a recent report from Adobe, COVID-19 has massively accelerated the growth of e-commerce; total online spending in May 2020 reached $82.5 billion, up 77% from May of 2019. Adobe estimates that under normal circumstances, that much growth would have taken four to six years.
"With this enormous increase in online sales will come an enormous increase in chargebacks," says Monica Eaton-Cardone, co-founder and chief operating officer of Chargebacks911. "In addition to the customary friendly fraud, we're seeing an unprecedented uptick in chargebacks related to delivery and service issues—a situation that could become the 'new normal' in retail."
The growth of service-related chargebacks, says Eaton-Cardone, stems from a combination of heightened e-commerce volume, an expectation of timely fulfillment of these new orders, and merchants' struggle with COVID-based personnel shortages. Since the onset of the coronavirus crisis this spring, chargebacks based on service have overtaken friendly-fraud chargebacks, which represent 60% to 80% of all issuances.
Another factor that could be worsening the situation, notes Eaton-Cardone, may be contactless payments, which have risen sharply in the U.S. since the onset of the COVID-19 pandemic. Both consumers and merchants, she says, need to be aware of the potential for illegitimate charges as fraudsters become more adept at stealing contactless access to accounts.
Despite these caveats and the still-difficult surrounding circumstances, says Eaton-Cardone, there is good news in today's situation for merchants and their customers alike. While U.S. retail sales for the second quarter of 2020 were 8.1% below those of the third quarter of last year, sales for June 2020 were up 7.5% over June 2019.(5) "This is a new day for retail," she says. "Merchants, banks, and consumers need to adopt, and abide by, updated procedures that are fair to all concerned."
Merchants, says Eaton-Cardone, should first and foremost emphasize clarity in their customer relations, communicating effectively about potential delays or other issues, and being accessible at all hours across all channels of interaction. At the same time, she says, merchants need to take steps to mitigate risk wherever possible. "This means optimizing practices to prevent avoidable delays, as well as using tools, like our proprietary technology, to screen transactions effectively and stop fraud."
