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.
Merchants are often responsible for the chargeback costs—including both refunding the purchase and any associated fees. Here's a look at the impact chargebacks have on merchants: Lost revenue, as merchants generally are obligated to refund the customer's purchase when a chargeback is granted.
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.
A chargeback fee is an additional fee that a merchant is charged every time they receive a chargeback. This fee is charged by the merchant's acquirer and is intended to incentivize merchants to try to avoid chargebacks as much as possible.
If the issuing bank determines that the merchant has not provided compelling evidence, the temporary credit to the cardholder for the transaction amount will become permanent and the merchant loses the chargeback amount, plus fees.
The merchant is liable for the acceptance of any fraudulent order and the cardholder's issuing bank will collect the customer's refund from the merchant should a cardholder request a chargeback.
The industry average for chargeback win rates is 30%.
The former is when the actual cardholder makes a purchase using the card, but claims the transaction was fraud. The latter is when another person uses the cardholder's card without their permission.
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.
Possible Legal Action. In many cases, taking legal action against a merchant when a chargeback is lost is well within the rights of the consumer. Depending on the situation and legislation governing the purchase, different types of legal recourse are possible.
In fact, chargebacks cost online businesses around US$125 billion, with every $100 lost in chargebacks translating to $240 in actual losses. Stripe reports that the digital goods and money transfer industries are the most vulnerable to online fraud, with combined losses expected to reach $60 billion by 2025.
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.
Yes, when done intentionally, chargeback fraud is illegal. When investigating chargeback fraud, it's important to keep in mind that there are legitimate reasons for chargebacks that do not constitute fraud. Let's explore those cases to understand the difference between chargeback fraud and legitimate chargebacks.
Merchant Win Rate Percentage. Midigator suggests that 77% of merchants win, on average, 30% of chargebacks across all industries [2]. This rate boosts to 43.82% when it comes to friendly fraud chargebacks. But sinks to 9.27% regarding true fraud chargebacks.
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.
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.
High-risk industries, particularly those where purchases are made without physical cards—like online retail, digital goods, and travel services—often experience elevated chargeback rates.
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.
Yes, merchants can take cardholders to court for chargebacks, particularly if they believe the chargeback was fraudulent or unjustified. To do this, the merchant would file a lawsuit in small claims court, seeking to recover the funds that were charged back, plus any additional damages or costs incurred.
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.
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.
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.
If your dispute is denied, the charge will go back to your credit card. You should receive an explanation from the credit card issuer detailing the reason the dispute was denied. If you refuse to pay, they can put your account in collections or seek legal action.
Banks and credit card companies use advanced tracking and monitoring systems to detect and analyze unauthorized transactions, and they can often trace the origin of fraudulent activity by examining transaction patterns, merchant locations, and digital footprints.
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).