Fraud by merchants against consumers usually results in Acquirer Loss. This is because the consumers of today are frequently buying on-line via credit or debit card. Underwriters should be aware of how low value/over priced merchandise or services sold to consumers will impact chargeback rates.
Credit card processors lose hundreds of millions of dollar every year to merchants who are themselves fraudsters.
Typically these are merchants who are selling some product or service that will not provide the customer with what he expected, or perhaps with nothing at all. This results in the customer initiating a chargeback with his card company. If the merchant has disappeared, or has no money to pay for the chargeback, the bank or processor is responsible.
Other scammers will set up false merchant fronts to launder unauthorized credit card charges. They can buy card numbers and the associated data that allows them to process the transaction and will be very hard to find by the time the cardholder disputes the charge.
Alternatively, they will have relatives or other fellow countrymen obtain credit cards which will then be run through the payment system for large amounts, even though no merchandise changed hands. The complicit cardholder will then dispute the sale with a chargeback or will default on his credit card company.