Chargebacks & Friendly Fraud

Chargebacks and friendly fraud rose sharply in 2024, revealing weaknesses in digital payments. Digital fraud grew by 15%, adding significant pressure on merchants. The average chargeback amount increased slightly from $165 in 2023 to $169.13 in 2024, but the real story is in the frequency—dispute rates climbed 78% in the third quarter alone. This signals more aggressive use of payment disputes by fraudsters.

Friendly fraud, where customers claim refunds for goods they've received, jumped by 72% according to Chargebacks911. Often, these disputes happen because of confusion or convenience, not genuine fraud. But another troubling trend is the rise of synthetic identity fraud, where criminals blend real and fake personal data to carry out disputes, making the problem even tougher for businesses.

Luxury merchants, particularly in fashion and jewelry, face strong fraud challenges. High-priced goods attract fraudsters looking to quickly resell stolen items. In 2023, the average luxury retailer lost $3.97 million due to fraud. The cost extends beyond stolen goods—merchants face additional fees, administrative burdens, and potential fines if chargeback rates get too high. In early 2024, each dispute cost $374, causing significant financial strain.

How merchants stay prepared

Merchants are fighting back with smarter approaches. Analytics and artificial intelligence can help businesses spot suspicious behavior early, stopping fraud before products leave the warehouse. Multi-layered authentication methods like 3D Secure 2.0 and biometric tools like facial recognition confirm customer identities at checkout, greatly reducing unauthorized transactions.

Clear and open communication can prevent disputes. Merchants who offer timely shipping updates, transparent return policies, and detailed confirmations see fewer misunderstandings that lead to chargebacks. Automated dispute management tools help streamline this process, saving time and improving success rates in resolving disputes.

Education also plays a key role. Informing customers about the real costs and impacts of chargebacks encourages them to contact customer service before filing disputes, which can greatly reduce unnecessary chargebacks.

Zenobia Pay

Zenobia Pay provides targeted solutions for luxury merchants facing fraud challenges. By enabling instant-clearing bank payments, eliminating credit card processing fees, and offering a strong fraud guarantee, Zenobia Pay reduces risks significantly.

Zenobia is also working to eliminate friendly fraud by building payments specifically for the luxury market. Reviewing every dispute ensures fair and clear resolutions for merchants. For luxury businesses looking to minimize fraud and enhance profitability, integrating Zenobia Pay makes good sense.