In-App Shopping & Chargebacks: What’s the Connection?
Will Increased App Usage Lead to More Chargebacks? Why?
Mobile-savvy consumers love apps. Whether for gaming, social media, or shopping, users appreciate the functionality and degree of personalization offered by the in-app experience. While this presents definite opportunities for merchants, it can also introduce new, unanticipated challenges.
Consumers Want Frictionless In-App Interactions
A recent study examined consumers in nearly a dozen countries including the US, China, the UK, and Japan—all among the world’s largest eCommerce markets. Researchers found the average global consumer in 2017 has more than 30 apps installed on their mobile device, and will use approximately nine different apps each day. Looking at the US specifically, users spend nearly two and a half hours each day interacting via a mobile app.
What stands out is how fast these figures changed compared to 2015, when the average consumer used just five apps and spent barely 100 minutes in-app each day.
Consumers want mobile-enabled interactions, and they expect those interactions to be smooth and involve minimal friction. Retailers that can provide a great in-app experience stand to benefit, as shoppers will keep coming back for that functionality. Pushing too aggressively to minimize friction, however, can end up costing merchants.
Why Friction is Not Always a Bad Thing
We tend to think of friction as a negative force in eCommerce. It places barriers between the customer and your products and can lead frustrated shoppers to abandon their orders. Retailers introduce in-app conveniences like recalling shopping history, saving payment information, and one-click checkout in the interest of reducing friction.
However, the negative ramifications can be much worse if there is little-to-no friction involved in a transaction. A frictionless environment can enable:
- Family Fraud: an unauthorized transaction made by a relative of the cardholder.
- Friendly Fraud: an unjustified chargeback requested after a valid transaction.
- Criminal Fraud: the unauthorized use of cardholder information obtained illegally.
- Affiliate Fraud: inflation of sales figures by affiliates to collect unearned commissions.
These are just a few of the complications demonstrating why a degree of friction during the in-app shopping experience is a positive thing. A measured amount of “good” friction can:
- Prevent overenthusiastic spending that leads to buyer’s remorse.
- Unauthorized users—both friend and foe.
- Third-parties taking advantage of lax validation standards.
Distinguishing “Good” and “Bad” Friction
Simply put, positive friction verifies the customer’s identify according to best practices. It also allows the customer to pause for a moment and think about the purchase and whether they want to complete the sale. This minimizes the chance that individuals will commit friendly fraud by requesting a chargeback due to buyer’s remorse.
Negative friction does nothing to prevent fraud or chargebacks. It only places unnecessary barriers between yourself and your customer. Negative friction frustrates shoppers and contributes to shopping cart abandonment. Even worse, if an individual has a negative experience while shopping with your app, they are much more likely to uninstall it and disengage permanently.
The goal is to create just the right amount of friction at key points in the checkout process, balanced by excellent and totally frictionless customer service.
| Examples of Positive Friction | Examples of Negative Friction |
|---|---|
| Requiring the cardholder’s CVV/CVC at checkout. | No icons suggesting the sale is secured by established security providers (Norton, McAfee, etc.). |
| Require complex, unique passwords for customer accounts. | No customer service phone number available. |
| Offer 3-D Secure Technology. | Shipping costs/final total is unclear. |
| Asking customers to verify the order before submitting. | Inability to go back to previous steps in checkout. |
| Using AVS to verify the cardholder’s billing address. | Forced account creation before checkout. |
| Geolocation and IP verification. | Too many fields on checkout page. |
You’ll notice that “good” friction examples are more passive from the cardholder’s perspective. These techniques either add a minimal and very reasonable amount of resistance, or involve no customer interaction at all. It’s not perceived as friction if the customer is not made aware of it. In contrast, “bad” friction slows the shopping and checkout process, creating a frustrating in-app experience.
Eliminate Bad Friction Without Compromising Security
You cannot compromise on positive friction. Instead, take the following tips to help eliminate negative friction and improve your customer interactions:
- Auto-populate fields in the checkout process.
- Add an address finder to automatically complete fields.
- Allow a range of payment options, including credit/debit, PayPal, and Apple Pay/Samsung Pay.
- Make customer service contact information clearly visible on every page.
- Provide 24/7 customer service (third-party on-demand answering services are an option for peak seasons or after-hours).
- Save customers’ shipping information for later transactions.
- Offer perks for account holders to encourage repeat visits.
- Clearly state final total and all shipping costs. Consider providing a shipping calculator.
- Allow customers to view their browsing and purchase history in-app.
- Provide product suggestions and discounts based on past purchases.
Remember—not all transaction friction is a bad thing. You must distinguish between positive and negative friction, and do whatever is possible to embrace the former while eliminating the latter.
Interested in learning more about in-app chargebacks?
Contact the Payment Dispute Standards & Compliance Council today to learn how to get involved.Contact Us
Last Update: November 1, 2017
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