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Insights and Expertise

It's time to address pute, depending on their payment processing agreements.

transaction Accumulated fees from frequent chargebacks can signifi-
cantly erode a business's profit margins, especially for
those dealing with recurring payments. A high charge-
confusion head-on back rate also drives up a business's processing fees and,
in severe cases, can jeopardize its ability to accept card

cessing privileges can be particularly damaging, limiting
By Roger Alexander payments. For online businesses, losing credit card pro-
Chargebacks911 sales opportunities and customer reach. Beyond these fi-
nancial effects, chargebacks also take a toll on reputation.
magine reviewing your bank statement and noticing
a charge that doesn’t ring a bell. It’s not from your Consumers who mistakenly file disputes may leave with a
favorite coffee shop or a streaming service, but a lasting negative impression, associating the business with
I strange, unidentified merchant with an unrecogniz- unclear communication or even perceived deception. Over
able string of letters and numbers. The amount taken is time, this can diminish customer loyalty and harm brand
significant, leaving you questioning if you’ve fallen victim perception, as customers may turn to competitors for a
to fraud. For most, the first instinct would be to reach out smoother experience.
to their bank to dispute the transaction. And it’s Causes of transaction confusion
understandable—cybercrime is estimated to cost the UK
alone a staggering £27 billion (US$34.01 billion) each year, While consumers may sometimes initiate chargebacks
a figure that continues to rise. hastily, the responsibility often lies with merchants to
ensure clear communication, especially for those doing
While many imagine digital theft as direct hacking, pay- business online, where checkout experiences may be less
ment fraud is often far more subtle: through deceptive impressionable and more likely to be forgotten. When
means like phishing or sending cardholders to fake web- customers don’t receive an immediate receipt or confir-
sites, where sensitive details are taken and misused on mation of the purchase, these inconsistencies can lead to
genuine sites or manipulated into fake purchases. confusion that may quickly escalate into disputes.To avoid
these issues, merchants should adopt clear, recognizable
The problem of transaction confusion descriptors and streamline their
When a transaction that a consumer doesn’t recognize ap- billing communications, providing transparency from the
pears on a statement, even if it's legitimate, it often triggers moment of purchase to the statement line.
unnecessary chargebacks. Chargebacks911’s Cardholder
Dispute Index reveals that 58 percent of consumers find The rising cost of chargebacks
their statements unclear, and nearly 20 percent report this
confusion frequently. Over half (53 percent) of consumers Chargebacks continue to pose significant challenges
have initiated a dispute without first reaching out to the for merchants, affecting both revenue and customer
merchant—a response driven by a lack of clarity on whom relationships. Here are key statistics highlighting the
to contact. current state of chargebacks in the payments industry:

This confusion is frequently caused by unclear merchant • $125 billion: The estimated global cost of
descriptors on statements. Often, transaction descriptions chargebacks in 2023, including lost revenue,
appear as cryptic codes or names unfamiliar to the cus- fees, and operational expenses. – Fit Small
tomer, such as an obscure series of letters and numbers Business
or the parent company’s name rather than the brand the
consumer recognizes. For instance, a purchase from a • 58% of consumers: Report difficulty under-
well-known online store might appear under the name standing transaction descriptors on their
of a holding company, causing unnecessary alarm and statements. – Chargebacks911
prompting disputes that could have been avoided with • 53% of disputes: Initiated without consum-
clearer descriptors. ers contacting the merchant first. – Charge-
Impact of transaction confusion on merchants backs911

When customers misinterpret a transaction as fraud, they • 1.5% chargeback rate: Can lead to increased
often initiate a chargeback—a process in which the con- processing fees or loss of credit card privileg-
sumer’s bank forcibly reclaims funds from the merchant. es for merchants. – Chargebacks911
Though designed to safeguard consumers, this system
comes at a high cost to businesses. Firstly, chargebacks di- Clear communication and proactive strategies are critical
rectly impact merchants’ revenue. Not only do they forfeit to mitigating these risks.payments and mobile wallets are
the sale itself, but they also incur a chargeback fee, which now standard, especially in major cities
can range from £15 (US$18.89) to £100 (US$125.96) per dis-
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