The page is light on details, but is it scoped and merchant/amount/time limited? Because if not, it’s yet another “hack” that merely reduces one specific type of fraud (when a card number is leaked) without fully addressing the problem, so the need for chargeback arbitration (and thus associated costs) persists.
You'll still get a lot of chargebacks by the way. With a lot of ecomm I've been involved with the fraud you are talking about is actually a small part of chargeback volume. Most is unhappy or demanding customers, or another type of low level fraud, claiming goods didn't arrive despite a photo of the person literally accepting them from the delivery company. This is absolutely rampant in b2c with smaller merchants (I am aware you mentioned this but not sure if you are aware of the scale of it).
The alarming rise in the incident rate of inappropriate chargebacks ("my fries were cold") really pisses me off as a sane user of contemporary credit card infrastructure. That is, I think of chargebacks as an absolute last resort; essentially a bulwark/ombudsman to protect me from bad actors. It should be used incredibly conservatively, and it should have significant reprocussions if it is used inappropriately; sort of like steep fines for hitting the emergency strip on a subway because someone wont move their backpack.
If chargebacks go away and aren't replaced by something at least as effective, that means that we're losing one of the most significant advantages intrinsic to the payment mechanism: peace of mind.
Chargebacks are in many cases the outsourcing of proper consumer-protection regulation and everyday customer service.
When the merchant fails to deliver or underdelivers -- "my fries were cold" -- appropriate customer service should be meeting the customer at that point and addressing it directly.
Modern systems of unempowered on-the-ground employees and endless loop self-service support stand in the way of that. Consumers naturally respond by pulling the levers that remain, which is invoking the wrath of American Express.
Reasonable people can disagree. What is a customer to do if they think a merchant is not a bad actor, but mistakenly refuses to refund their purchase? A chargeback seems like the fastest and cheapest option to resolve the dispute.
Thing is, if you eliminate the risk of unauthorized transactions, you can then reasonably discontinue the concept of chargebacks as a whole, replacing it with a mediation/arbitration service that consumers can opt-in for an additional fee.
This would open the door to cheap or even completely fee-free transactions if the user doesn't want to opt-in to additional protection, which they reasonably may not want when the stakes are low enough (you weren't gonna chargeback a lunch anyway).
But for this to be viable, the risk of unauthorized transactions/origination fraud needs to be eliminated completely at a technical level, something I believe an oAuth-style system would do, and currently none of the many of hacks on top of the legacy system address. Otherwise, you'd still need to take some fees to refund unauthorized transactions, separate of customer-merchant conflicts.
How do you handle the part of chargebacks that currently validly apply to authorized non-fraudulent transactions, like services/product not delivered or not as described, or accidental double charges from vendors like random taxi drivers with whom you don't have a way to arrange a refund?
It already works like that here (eu) for debit cards (which most people have; very few have credit cards although they don't know the difference). Double charges from taxi drivers is not possible as it's tapping or dipping your card and you are there for that (we are assuming some system that prevents someone stealing your card like biometrics or whatnot); products not as delivered is responsibility for the seller to refund/replace and in other cases you go through a process of mediation. I had it once in my life, which is now 50 years. It sounds like Americans willy-nilly chargeback whatever because they can (fries were not hot or cold enough): seems not very good for the fees. Most people who travel have creditcards here and the most ones I know have no idea they can chargeback or ever needed it.
Keep in mind that card disputes are a thing even for debit cards. Credit cards may have higher protections by law that force the lender to eat the disputed amount regardless of the dispute's outcome, but the actual process of disputing a transaction is applicable to all cards - I've successfully done chargebacks on debit cards here in the UK.
> Double charges from taxi drivers is not possible as it's tapping or dipping your card and you are there for that (we are assuming some system that prevents someone stealing your card like biometrics or whatnot)
You'd be surprised - at least in the public transit context with iOS Express Mode, double Apple Pay taps by transit systems have absolutely been recorded plenty of times. I admit I haven't heard about this in the taxi situation, but unless the technical problem is specific to Express Mode and not general to tap-to-pay, I don't know why it wouldn't ever happen.
> products not as delivered is responsibility for the seller to refund/replace and in other cases you go through a process of mediation.
This assumes the seller is willing to do their job or go through the process of mediation, and/or that the buyer has sufficient legal insurance or available cash to cover the up-front cost of lawyers plus any related expenses plus the possible attorney's fees of the other side if the court decides against them.
Even in the EU, this is far from always true, especially for low-price purchases or when dealing with foreign online merchants who are more likely to ignore EU lawsuits or mediation attempts than to cooperate.
Of course, trying to resolve things with the seller is always the right first step, and that's the usual approach even in the US. It's just great to be able to have the leverage of the chargeback option as extra incentive for the merchant to be reasonable. (By the way - the chargeback right is not unconditional even when the reason claimed is one of the allowed reasons. The merchant can dispute it and can sometimes win depending on the circumstances, the evidence, and the bank.)
> It sounds like Americans willy-nilly chargeback whatever because they can (fries were not hot or cold enough)
To be honest, no, the idea that chargebacks are something Americans rush to do is a stereotype and not true. They're pretty rare when neither the buyer nor the seller is doing something shady, but having the option to charge back is pretty important in order to make US single-factor (no-pin / no app-based verification / no meaningful signature verification) credit cards secure enough for customers to rely on, especially for online purchases from random small merchants who can't be relied upon.
And "fries were not hot or cold enough" would pretty much never be a valid reason for a chargeback, since usually a specific temperature isn't promised before purchase.
> seems not very good for the fees
It definitely affects the fees, but honestly, a bigger impact is that the US does not cap what fees credit card issuers can charge the merchants, so the fees are much higher than the typical EU consumer card regardless of chargebacks. Some of that is of course kept by the banks as profit, but much of it is returned to customers as reward points, cash back, or other perks. It's among the reasons why I continue to use my US credit card as my primary form of payment even here in Germany. Zero foreign transaction or currency conversion fees, great perks. (This card does require a decent US credit history and has an annual transaction fee, but I get enough value out of it to outweigh that fee.)
How many chargebacks have I done in my entire life for a reason other than actual fraudulent / unauthorized transactions? Probably under 5, maybe 1-2 at most. Plus most of the fraudulent transactions were noticed proactively by the bank rather than me having to bring it up to them. Because it's a true credit card and not a debit card, I never had to pay for those fraudulent transactions.
> To be honest, no, the idea that chargebacks are common in the US is a stereotype and not true.
The thing is, even here on HN (where I expect, maybe not warranted, the level to be higher), people seem to absolutely proud and entitled to chargeback whatever for whatever reason. Those are almost 100% Americans (I check) and that is where I got the idea; this sentiment is much higher on tiktok, youtube, reddit etc. I even saw some shorts of people screwing merchants with chargeback like it is some batch of honour.
>The thing is, even here on HN (where I expect, maybe not warranted, the level to be higher), people seem to absolutely proud and entitled to chargeback whatever for whatever reason.
I'm not American (I'm from the UK), but filing a chargeback is an incredibly satisfying weapon for a consumer.
So many companies try to weasel out of their legal obligations under consumer protection law, so why not hit them with a chargeback when they won't do what they're required to?
After being burned by PayPal protection not working out, I will now buy anything I can directly on a Credit Card, as you just get so much more protection in the UK - both contractually and legally.
> The thing is, even here on HN (where I expect, maybe not warranted, the level to be higher), people seem to absolutely proud and entitled to chargeback whatever for whatever reason. Those are almost 100% Americans (I check) and that is where I got the idea; this sentiment is much higher on tiktok, youtube, reddit etc. I even saw some shorts of people screwing merchants with chargeback like it is some batch of honour.
That's an example of selection bias and other confounding factors: HN users are disproportionately American, Americans are more likely to know of chargeback rights than people from other countries, Americans are more likely to have credit cards than people from other countries, American statutory rights in this area (especially for credit rather than debit cards) are stronger than in most other countries, people who abuse chargebacks are more likely to be American than from other countries for all of the foregoing reasons, Americans are more likely to boast than people from most other countries, Reddit has disproportionately many Americans, and people who make shorts about chargebacks are more likely to do chargebacks than people who don't.
Consider statistical rather than anecdotal evidence in this area. According to one payments processing company, Clearly Payments, the USA has slightly below average chargeback rates, at 0.47%, behind the UK, Belgium, Germany, and France:
There's nothing wrong with using a right the card networks explicitly provide you. Even here on HN I see a huge tendency to play fast and loose with access to customer money, and corporation-on-consumer fraud has been normalized and is treated as no big deal. Chargebacks are a normal and expected reaction to that.
I'm sure chargeback abuse is a thing, but in aggregate, I'd argue people are still not doing enough chargebacks, because businesses are still engaging in unethical (& potentially illegal) practices of billing customers for services not rendered, or unclear pricing, or dark patterns.
Dark patterns with regards to payment should be a big no-no, and the fact they're still around suggests this behavior isn't being punished enough. So we should in fact have more chargebacks, until the situation becomes that it's more profitable to play fair and legal than try dirty tricks.
Unlimited, no-confirmation access to pull money just based on a static card number is a bug to begin with - ideally every money movement would be authorized on the spot or preauthorized in advance up to a limit.
But assuming we do have this bug, it seems like merchants are happily abusing it - "free" trials that are impossible to cancel, unexpected charges buried in 50 pages of T&C, etc. Chargeback is a completely normal reaction to this and I recommend it to everyone.
The heuristic I use is simple: did I expect this charge, and would I have agreed to pay for it had I been asked for upfront? If not, the merchant gets a quick email, and if they're not cooperating, taking unreasonable time to action it or are outright unreachable they're eating a chargeback and it'll be up to them & their processor to argue it further. They are welcome to put their processor/acquirer person on hold for hours (like they would do me if I were to play their game) and see how that works out for them.
> I'm sure chargeback abuse is a thing, but in aggregate, I'd argue people are still not doing enough chargebacks
But it only adds fees aka an extra tax; you are paying for it. Merchants just up the prices, banks up fees, conversion rates, etc etc. Someone is paying for it and it's always most likely you. The strange idea people have that 'this is free because it is law' is interesting. It is VCs (in neo banks), it is you in established banks. I rather do not pay for any of your chargeback behaviour really.
But I’d rather pay a small tax across everything rather than get stuffed for a much bigger amount.
Ideally, we’d have technical means to prevent people from getting stuffed (the oAuth-style token system I’ve described in other comments on this thread), combined with legal means to ensure businesses are discouraged from doing the stuffing in the first place (and those who do are promptly sued out of existence).
Until this happens, consumers (including me) will keep using chargebacks as their only way to defend their interests.
Also, if we were to magically rewrite the system tomorrow and eliminate card fees and the potential for chargebacks, do you really think businesses worldwide will suddenly lower their prices as a result? The market already demonstrated it is willing to pay the current prices, so the savings from lack of fees/chargebacks will end up in executives’ yachts instead or pissed away in more advertising.
> You'd be surprised - at least in the public transit context with iOS Express Mode, double Apple Pay taps by transit systems have absolutely been recorded plenty of times.
Where? I heard it many years ago a few times but not for a very long time? Maybe it was a bug which got fixed?
It was common in NYC even a couple of years ago. Very likely it was a bug indeed, but unless there's a good technical reason why such bugs would only happen with merchants who can easily be reached to arrange refunds and who will routinely cooperate with those refunds, unwarranted double charges should be disputable via chargeback. (Naturally, not all double charges are fake - some are legitimately paying the same amount more than once. Being able to start a chargeback procedure doesn't prevent the merchant from showing the bank evidence that the charges were correct.)
Ah, you're proposing to remove US credit card customers' statutory right to those chargebacks except if they opt into a surcharge on a per-transaction basis.
Yes, essentially moving the transaction fee the merchant pays to the consumer. This means they can choose whether they want the additional protections those fees currently pay for.
