Attempting to reverse the chargeback and the resulting revenue loss can significantly improve a business's bottom line. The vast majority of merchants in this study made fighting chargebacks a top priority. Just over 77% of merchants had a win rate above the industry average of 30%.
Merchants win chargeback disputes approximately 20-30% of the time, though this success rate can vary widely based on factors such as the industry, the quality of the evidence presented, and the specific reason for the chargeback.
What are the chances of winning a chargeback? The average merchant wins roughly 45% of the chargebacks they challenge through representment. However, when we look at net recovery rate, we see that the average merchant only wins 1 in every 8 chargebacks issued against them.
Chargeback can be a very effective way of getting a refund – yet it is important to understand that, in practice, you are disputing a payment.
On average, merchants win approximately 32 out of every 100 chargebacks they decide to contest. This means that if you're a merchant dealing with 100 chargebacks, you can typically expect to successfully recover funds from around 32 of those disputes.
While there isn't a guarantee to win a chargeback dispute as a seller even if you are in full rights, there are some steps that you can take to increase your chances significantly.
Loss of revenue: Chargebacks result in a direct loss of revenue for merchants, as they have to refund the disputed amount to the customer.
If the issuer does not believe that the merchant's evidence disproves the cardholder's claim, the chargeback will stand. While merchants can appeal the case by requesting arbitration from the card network, it isn't usually a good idea to do so.
If the customer's chargeback is denied, the merchant will get the transaction amount refunded to their account. If the chargeback is approved, the customer gets the purchase amount refunded to them.
The industry average for chargeback win rates is 30%.
Another source suggests that merchants win 43.82% of all friendly fraud cases [2]. However, merchants only won 9.27% of true fraud chargebacks. The former is when the actual cardholder makes a purchase using the card, but claims the transaction was fraud.
Merchants who do choose to fight chargebacks face a time-consuming, expensive process that can drain internal resources (or where internal resources may lack the required expertise). Additionally, it can be complex and difficult to determine when to dispute a chargeback and when to walk away.
Chargeback fraud, in law, can sometimes be considered a form of payment card fraud or wire fraud. So can chargeback fraud result in jail time? Technically, yes, but usually only in extreme circumstances where it's used to steal very high values or volumes of products and services.
How do banks investigate charges? Banks hire full-time fraud professionals to investigate suspicious, unusual, and unauthorized transaction activity. These specialists analyze transaction data, monitor rules-based fraud detection information, and respond to fraud tips or disputes submitted by cardholders.
The chargeback dispute win rate measures how often disputes happen versus how often you can successfully recover the money from those chargebacks.
Chargebacks negatively impact a merchant's reputation.
Even if you win a dispute, a chargeback reflects poorly on your company. If multiple claims are filed against you, you will be enrolled in a monitoring program, which becomes even more costly.
Within 120 days of the last date, the cardholder expects to receive the goods or services (not to exceed 540 calendar days from transaction). Within 120 days of the date, the cardholder was informed that the goods/services would not be provided (not to exceed 540 calendar days from transaction).
The issuer (cardholder's bank) is responsible for determining the winner and loser, but your processor inspects the case first. Only certain cases are forwarded on to the issuer for decisioning. If your chargeback response doesn't advance, you can't win.
Chargeback fees are charged by the business's “acquirer,” which is the financial institution working on behalf of the merchant. The merchant will have an account with this acquirer, which will accept payments for products and services.
From a financial perspective, you not only lose the money, but also the product or service that you sold to the customer as they won't return it. Financial losses aside, chargebacks also have a negative impact on your bank and card network, and this can damage your credit reputation.
Merchants have a low overall success rate in winning chargebacks (around 30%). Friendly fraud (not actually fraud) makes up 75% of all chargeback cases. Fraudulent purchases are the most common reason behind chargebacks (34%).
Paying the chargeback fee to the card processor. Even if the merchant files a chargeback dispute and the issuer decides not to grant the customer a chargeback, the merchant is still obligated to pay this fee.
Disputing chargebacks that are high-value transactions can help you recover substantial revenue. Let's take a $500 order disputed as fraudulent, this alone is worth the effort because of the substantial revenue that can be recovered.
Merchants carry the 'burden of proof' in chargeback disputes: In a chargeback scenario, merchants must identify the item, date, amount, and buyer. Merchants are required by law to respond within 30-45 days or the chargeback is automatic.