They are more than a problem & annoyance for merchants. They are completely prohibitive to a lot of services. Chargebacks essentially mean that a merchant has no guarantee that they get to keep a payment till 6 months after it has been made. In market where goods are easily resale able, this adds significant costs in fraud and fraud prevention. My guess is 5%+ for the more vulnerable merchants. This hits smaller/new merchants disproportionately. It also raises the required skillset for being an online merchant.
To minimize fraud merchants will often refuse risky business like international orders or orders where the billing and deliver addresses don't match.
There are several interacting "margins" limiting ecommerce. Merchants not skilled enough in fraud protection. Market to fraud prone. Low margin markets where 2.5% processing fees + 2.5% fraud + 2.5% fraud prevention make it unserviceable. Move any of the boundaries and you will allow more merchants to exist.
Are they great for consumers? There are invisible effects that ultimately hurt consumers. A site may refuse to deliver to you. It may hold back shipments until the fraud checks are done. You may be paying more. A site may not exist at all because they were unable to deal with chargebacks.
Comments
They are more than a problem & annoyance for merchants. They are completely prohibitive to a lot of services. Chargebacks essentially mean that a merchant has no guarantee that they get to keep a payment till 6 months after it has been made. In market where goods are easily resale able, this adds significant costs in fraud and fraud prevention. My guess is 5%+ for the more vulnerable merchants. This hits smaller/new merchants disproportionately. It also raises the required skillset for being an online merchant.
To minimize fraud merchants will often refuse risky business like international orders or orders where the billing and deliver addresses don't match.
There are several interacting "margins" limiting ecommerce. Merchants not skilled enough in fraud protection. Market to fraud prone. Low margin markets where 2.5% processing fees + 2.5% fraud + 2.5% fraud prevention make it unserviceable. Move any of the boundaries and you will allow more merchants to exist.
Are they great for consumers? There are invisible effects that ultimately hurt consumers. A site may refuse to deliver to you. It may hold back shipments until the fraud checks are done. You may be paying more. A site may not exist at all because they were unable to deal with chargebacks.