Types of Fraud
      Back to home
      1. Knowledge Base
      2. Types of Fraud

      What does fraud cost businesses?

      In 2022, the total global cost of ecommerce fraud was over $41 billion, and that number is expected to surpass $48 billion by the end of 2023.

      Ecommerce fraud continues to cost businesses more and more. 

      These costs are felt in a number of places:

      • Cost of goods sold. Because it’s unlikely the merchandise will be recovered, businesses have to write off the value of goods involved in a fraudulent transaction.
      • Shipping costs. These costs are typically sunk into the value of the order, which further adds to the business’ out-of-pocket loss. Even worse is that fraudsters typically request high-priority shipping for their orders, resulting in even higher shipping costs for the business.
      • Monitoring programs and fees. Card issuers like Visa and Mastercard have strict programs that penalize businesses when their chargeback rates go above a set threshold. A business that exceeds the chargeback rate threshold for any three-month period (e.g., 1% of all transactions or 2.5% of the total dollar volume) can be penalized with a fee for every chargeback and placed in a monitoring program with even higher fees. In extreme cases, the business may lose their relationship with the credit card issuer.
      • Bank fees. In addition to paying the penalties charged by card associations, businesses must pay an additional processing fee to the acquiring bank for every chargeback.
      • Administrative costs. On average, chargeback disputes require about one to two hours of processing. The business has to research the disputed charge, contact the consumer, and respond to the acquiring bank or issuer with adequate documentation to dispute the chargeback.
      • Reputation loss. Maintaining a positive reputation among customers is very important for businesses. Customers are less likely to shop with businesses that have processed transactions with their credit card information.

      Related Topics

      Ecommerce Fraud Basics

      Chargeback Management

      Related Resources

      The True Cost of E-Commerce Fraud

      Chargeback Fees: What Do Chargebacks Cost?

      What Is the Time Limit on Chargebacks?

      Understanding Credit Card Chargeback Reason Codes