> This is actually accounted for in the merchant interchange rate. It varies by MCC and potentially merchant to merchant and the frequency of chargebacks is built into how much the merchant pays for processing.
But the number of chargebacks is as much related to the frequency of buyer fraud in that industry rather than anything the merchant can control. If it's all buyer fraud then the rate is high, but how do you solve that other than by moving the liability back to the buyer?
> Merchants may offer cash or other payment method discounts, so in a sense, what you're asking for already exists.
It exists in person, but where's the equivalent that allows you to pay cash over the internet? Cryptocurrency, maybe, and now we're back to monopolies and market share because you can't really accept something people aren't familiar with and don't know how to use.
> If someone has a number of chargebacks, the customer is investigated and has their account suspended or charged with fraud.
One of the most common sources of chargebacks is identity theft. Someone makes a purchase on a stolen card and then the real cardholder gets the bill and disputes the charge. The merchant in that case did nothing wrong but has to eat the loss, even when the identity theft was enabled by the cardholder's negligence. Then we get more such negligence, and lose the demand-side market pressure for higher security like two factor authentication and replacing credit card numbers with public keys that could have prevented the fraud, which increases costs for everyone.
But investigating the customer whose name is on the account does you no good in that case, because even if it was proximately their fault, it wasn't them who actually committed the fraud and it won't be their name on the account next time when some other negligent customer carelessly gives all their information to a fraudster because it costs them nothing to do so.
> Again, merchants and buyers are aligned in this case, both make money on greater transaction volume, this feature increases transaction volume, that's why it's there, otherwise it wouldn't be there.
It's there because the credit card companies don't give customers the choice.
> Also, paying per-transaction isn't really insurance as it leads to massive adverse selection risk.
All insurance leads to adverse risk selection. That's the nature of insurance. It's why you can't buy life insurance when you're 114 years old. Should we force them to sell it anyway and then make everyone else pay for it?
> The most helpful chargeback for me personally was a two thousand dollar chargeback against Expedia where they refused to refund a refundable ticket. I filed a chargeback and I got the money back within a few days.
And you would have otherwise had to take them to small claims court, which would have been more inconvenient.
Meanwhile if you paid 3% more on purchases totaling $200,000 over the last decade due to the increased buyer fraud, have you really come out ahead?
> It's a good thing, unless you've got data to back your case.
We would have the data if we gave people the choice.