The news: Consumers disputed about 105 million charges with US card issuers in 2023 worth an estimated $11 billion, per data from Datos Insights cited by the Wall Street Journal.
Card disputes are forecasted to rise 40% by 2026, per Datos.
Why is this happening: This growth in disputes can be divided into two categories—friendly fraud and legitimate disputes.
- Friendly fraud—part of an overall increase in card fraud—accounts for an estimated 20% of all disputes, per Visa-owned Cybersource cited by the WSJ.
- But many of these disputes are legitimate, the product of greater awareness of their consumer rights through finfluencers and other means. The dispute process was also streamlined during the pandemic, making it easier than ever to dispute charges.
Our take: Chargebacks cost issuers $37 to resolve on average, per Salesforce’s Eran Agrios. But this expense is a drop in the bucket for the issuers: Total card network transaction value will reach $11.99 trillion in 2024, per our forecasts.
Having an easy dispute process can also help the issuers improve customer satisfaction: 36% of survey respondents said being able to view their dispute status in their banking app is “extremely valuable,” per our 2023 US Mobile Banking Emerging Features benchmark.
But issuers will need to balance their relationships with merchants as disputing gets easier.
- The real burden falls on merchants, who get charged a chargeback fee whether they accept or deny the dispute.
- It can also affect their chargeback ratio, which can increase their processing fees.