The news: 79.64% of consumers prefer going straight to their bank to resolve a dispute rather than engaging the merchant in question, per a survey by Chargebacks911.

The bind for banks: Banks want to deliver exceptional customer service for their patrons. For chargeback disputes, this can unintentionally fuel adverse consumer behaviors.

Banks have made the dispute process fast and easy, and consumers are taking the path of least resistance: 88.24% of consumers report feeling incentivized to repeat a bank-led dispute process in the future.

However, banks want to minimize chargeback disputes, as the toll of operational costs and time spent investigating claims adds up: Chargeback volume is anticipated to hit $337 million by 2026, a 42% increase from 2023, per a Mastercard report.

The issue for merchants: Merchants face a losing game with chargebacks.

• Repeat chargeback requests can result in higher network fees or even getting blacklisted.
• Consumers are also often frustrated by the time it takes for merchants to issue refunds—encouraging them to tap their banks for help first.
• Even if a merchant successfully disputes a chargeback, they still have to pay a hefty chargeback fee. 

Our take: Both banks and merchants want to reserve the chargeback process for exceptional circumstances in customer care.

To that end, banks can introduce gentle forms of friction to redirect consumers to the appropriate channels first without making the chargeback process feel too onerous for genuine disputes. Banks, for example, could request verification that customers have contacted their merchant for a refund request before starting a chargeback investigation. 

Merchants, for their part, need to streamline the return and refund process with easy website navigation and confirmation emails to discourage consumers from jumping to their banks first.

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