72% of merchants report increase in chargebacks, leading to higher prices for consumers 

Almost three quarters (72%) of merchants have experienced an increase in chargebacks over the past three years, with many businesses raising prices to offset the growing costs.

These recently released findings from global chargeback tech company Chargebacks911 come as the payments industry grapples with the fact that illegitimate disputes by cardholders through card-not-present (CNP) transactions are outpacing the growth of eCommerce sales.

The findings from the 2024 Chargeback Field Report, which surveyed 300 retailers, from small businesses to enterprise merchants., emphasise that the rise in chargebacks—driven largely by first-party misuse (also known as “friendly fraud”)—is having a direct impact on pricing strategies across industries.

According to the report, presented in partnership with Edgar, Dunn & Company, 57% of merchants who observed changes in chargebacks noted an increase in frequency, with an average spike of 18%. As a result, nearly one-third of respondents admitted that the financial burden of managing these disputes has forced them to increase prices on goods and services.

To view the 2024 Chargeback Field Report in its entirety, click here

“The rise in chargebacks is becoming a vicious cycle,” saysMonica Eaton, CEO of Chargebacks911. “Merchants are raising prices to cover the cost of disputes, but in turn, this pricing pressure gives more incentive to those inclined to commit first-party misuse. The data clearly shows that friendly fraud is the real issue, far surpassing criminal fraud in many sectors.”

The report highlights a shift away from concerns over criminal fraud, with friendly fraud becoming the leading cause of chargebacks for many merchants. Nearly half of the respondents estimated that friendly fraud was responsible for at least 50% of their chargebacks, and 45% of those surveyed believed that customer misunderstandings—like not recognising transactions on billing statements—were a key driver.

Moreover, many merchants are struggling to effectively combat these illegitimate claims. While 75% of participants reported challenging some chargebacks, nearly half admitted that they don’t track second-cycle disputes, which suggests their recovery rates may be lower than expected.

In response to the rise in chargebacks, many merchants are turning to new technologies and strategies to mitigate losses. Two-thirds of survey respondents reported either using or planning to implement AI-powered fraud prevention tools. Despite these efforts, the report warns that businesses must do more to address the underlying issue of first-party misuse and better educate consumers on the proper use of chargebacks.

“Merchants need to be proactive, not just reactive,” added Eaton. “By employing better chargeback prevention tools and leveraging professional dispute management services, businesses can reduce their exposure to friendly fraud and regain control over their bottom line.”

To view the 2024 Chargeback Field Report in its entirety, click here

IRS Slot Win Tax Threshold Increase Recommended By Service

February 20, 2024

U.S. Congresswoman Dina Titus (D-Nevada) has been attempting to get the slot winnings tax threshold raised since 2015.

This week, her efforts received a boost, as the Internal Revenue Service’s Advisory Council has come out in recommendation of the move.

Titus and 24 other congressional members want the tax threshold for slot winners raised to $5,000 from $1,200.

The last time the level changed was in 1977. At that time, gambling in the U.S. was only legal in Nevada casinos.

Today, the IRS Advisory Council recommends changing the threshold to $5,800 in order to account fully for inflation.

Titus and the other backers of the change say that not only will this save winning gamblers tax payments, but casinos will save on bureaucracy.

Currently, any win of more than $1,200 results in the shutdown of a machine for anywhere up to an hour while an attendant is called and the appropriate forms are submitted for tax purposes.

Specifically in the booming Las Vegas market, wins o more than that amount are a regular daily occurrence on casino floors.

Bipartisan Backing

The policy change is backed by a group of cross-party politicians in Washington called the Congressional Gaming Caucus.

Titus is a cochair of the group, alongside Representative Guy Reschenthaler (R-Pennsylvania).

The 24-member group signed an open letter to IRS Commissioner Danny Werfel this week, asking it to take up its internal panel’s recommendations.

“We urge you to follow the IRSAC’s recommendation and exercise your authority to raise the threshold for slot machine jackpot winnings to $5,000, and to consider periodic increases to the threshold based on inflation,” the letter said.

“Taking this action will align with the IRS initiative to strategically use data to improve tax administration and modernize tax reporting for our constituents.”  

The American Gaming Association also came out in support of the IRS Council’s decision.

“The antiquated slot tax threshold creates unnecessary burdens for consumers, casino operators, and the IRS,” American Gaming Association (AGA) President and CEO Bill Miller said.

“The AGA commends Representatives Reschenthaler and Titus and other Congressional leaders for their dedicated efforts to modernize this long-outdated policy.”

Related: Codename Jackpot slot, reviewed and rated

IRS’ Decision

Previously, Titus and Reschenthaler have tried to push a bill through Congress on this matter.

Titled the SLOT Act, it failed to gain much interest from other lawmakers in the nation’s Capitol, and didn’t pass the House committee stage.

The AGA also tried to unsuccessfully enlist Donald Trump on the issue in 2020, during the then-President’s rescinding of many pandemic restrictions.

None of that will matter if IRS Commissioner Werfel now decides to implement the change anyway.

Although it is an official part of the IRS, the Advisory Committee is just that – advisory.

It was established to encourage discussion and better tax policy via talks between stakeholders, including lawmakers, taxpayers, and the agency itself.

The council suggested that this particular piece of the tax code could be updated in line with inflation every few years to avoid a 45-year lag between the threshold and the rate of rising prices.

Titus is hopeful Werfel will take up the recommendation, as she believes he was previously waiting to see if the situation would change through legislation.

“I feel like having the bill out there has been part of the reason he hasn’t made the change. But now, the commission has encouraged him to,” she said.