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This is a guest post from our partner, Verifi:

Fighting Chargebacks is Hard

Chargebacks are a complex, expensive and aggressive problem. First, they come in all shapes and sizes and impact all types of merchants. There are two main types of chargebacks – fraud (which includes true and friendly fraud) and non-fraud. True fraud chargebacks occur when the purchase was not made by the cardholder, as in a case of identity theft. Friendly fraud chargebacks happen when a cardholder disputes a charge that s/he did authorize claiming fraud and is also known as “I didn’t buy that” fraud or cyber shoplifting. There is also non-fraud chargebacks, which are purchases made intentionally by cardholders and then disputed under a claim (e.g. they never received the goods, the goods were damaged, etc.).

The fact is, in either case, the chargeback dispute process does not favor merchants. Banks and credit card companies require very little proof from consumers to validate a dispute claim. Here are 7 mistakes merchants can make when fighting chargebacks:

Mistake #1: Fully Understanding Chargeback Reason Codes

Effective chargeback representment requires strong knowledge of chargeback reason codes and compelling evidence requirements. The reason code classifies the type of chargeback, the reason the dispute has been requested by the customer, and establishes the required elements necessary if a merchant is disputing the consumer’s claim. Understanding reason codes and associated representment requirements is critical to preparing an effective chargeback dispute case. Maintaining a strong understanding of chargeback rules and regulations is critical to a merchant’s chance at representment success.

Mistake #2: Not Fighting

While merchants shouldn’t fight every single chargeback, it’s worse yet to do absolutely nothing. Careful analysis of every chargeback claim is necessary to ensure that the chargebacks that can be fought are fought. In some cases, the amount a merchant stands to win is significant. In these cases, the merchant should follow through with chargeback representment. Doing nothing means the merchant is guaranteed to lose 100% of its profits in every chargeback case. Merchants should seek to recover as much of their money as possible.

Mistake #3: Maintaining Customer Service Best Practices

Customers are less likely to initiate a chargeback if they feel they can quickly and easily resolve their concerns through a company’s customer service department. Proactive and effective customer service is often overlooked as a way to both prevent and successfully represent chargebacks. Merchants should clearly display customer service contact information on their website and on their checkout page, alongside clear refund policies.

Alternatively, if a customer does initiate a chargeback, it can be beneficial to directly contact the customer and inquire about the reason for the chargeback. The merchant has 7-10 days to dispute the chargeback via the channels expressed by the card brands; contacting the customer during this window can possibly spur the customer to undo the chargeback by contacting their issuer.

Generally, if a customer complaint is valid, the merchant should not dispute the chargeback if already initiated. DO NOT refund the cardholder if a chargeback has already been initiated as the merchant would then have the potential of losing the chargeback amount and the refund amount.

boxing-gloves - fighting chargebacks


Mistake #4: Wasted Effort

Merchants may be doubling their efforts, wasting time and resources by working cases that are already handled by the acquirer. Automatic representments are often initiated by the acquirer on behalf of the merchant; however, basic requirements to support automatic representments vary between acquirers. It is important for merchants to know which disputes qualify for automatic representment, so they aren’t working cases that are already being taken care of for them.

Mistake #5: Ignoring Red Flags

Merchants should track each chargeback dispute from beginning to end since much can be learned. In some cases, chargeback reasons may point to elevated fraud, which can prompt merchants to look into their fraud prevention measures for improvements or added protection. Track common chargeback reasons, as this may influence return and/or customer service policies moving forward.

Mistake #6: Evaluating Success and Your TRUE Win Rate

Having insight into your win/loss rate is especially important as there is great disparity in how win rates are calculated. Many 3rd party representment service providers boast a 90% win rate; however, those calculations are generally based solely on first representments. This is an exaggerated notion of success because often, a first representment may result in a reversal. Also, there is a dependency on the processor/acquirer as not all will indicate a reversal and provide a provisional credit when the response documentation is forwarded on to the issuer. There are also considerations where merchants have signed waivers that allow the processor/acquirer to forward the response automatically to the issuer and bypass any internal review processes. Additionally, many of these vendors selectively fight chargebacks, meaning they do not represent all chargebacks that can be represented. True win rate should be calculated by looking at the total disputes represented successfully without subsequent exceptions (2nd representment, pre-arbitration, or arbitration) divided by the total number of disputes, regardless if they are represented or not.

Mistake #7: Increasing Costs and Draining Internal Resources

Fighting chargebacks takes time, expertise and manpower. A recent Javelin study reports that fraud and chargeback management consumes between 13% and 20% of operational budget. Resource allocation is also a significant concern for merchants. That same study showed that 58% of digital goods merchants believe it’s necessary to maintain a dedicated in-house fraud and management staff effect on resource allocation related to dedicated fraud and chargeback staff, but almost the same amount (53%) said that level of commitment takes away budget from other revenue generating projects and departments. Small and large merchants alike can benefit from working with a representment partner, enabling them to focus on their core business and let trained experts do the heavy lifting.


Often businesses attribute disputes as a cost of doing business that can add additional losses related to excessive refunding or lost merchandise that never gets returned. 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. Whether a merchant has the internal expertise and resources to fight chargebacks or needs to augment or entirely outsource the process, they should consider the common mistakes outlined in this paper to ensure the best chances at successful revenue recovery.

About Verifi

Verifi, an award-winning provider of end-to-end payment protection and management solutions, was founded in 2005 to help our clients effectively manage the payments challenges they face everyday. Verifi helps merchants safely process payments, combat fraud, prevent and resolve costly chargebacks, as well as increase billings and keep loyal customers. Our best-in-breed solutions and white glove support are trusted by a wide range of industries from emerging companies to the Fortune 500. Headquartered in Los Angeles, California, we process more than $20 billion transactions annually and currently serve more than 8900 accounts worldwide.

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Frequently Asked Questions

What is a chargeback?

A chargeback is the process initiated by a cardholder when they contact their issuing bank to dispute a transaction on their account. Once initiated, the funds are debited from the merchant and returned to the shopper. A chargeback can be initiated for reasons such as fraud, goods damaged/not received, etc.

What is BlueSnap?

BlueSnap helps businesses accept global payments a better way. Our All-in-One Payment Orchestration Platform is designed to increase sales and reduce costs for all businesses accepting payments.

BlueSnap supports payments across all geographies through multiple sales channels such as online and mobile sales, marketplaces, subscriptions, invoice payments and manual orders through a virtual terminal.

And for businesses looking for embedded payments, we offer white-labeled payments for platforms with automated underwriting and onboarding that supports marketplaces and split payments.

With one integration and contract, businesses can sell in over 200 geographies with access to local acquiring in 45+ countries, 110+ currencies and 100+ global payment types, including popular eWallets, automated accounts receivable, world-class fraud protection and chargeback management, built-in solutions for regulation and tax compliance, and unified global reporting to help businesses grow.

Who can use BlueSnap?

Merchants around the world can use BlueSnap to accept payments in 200 geographies with BlueSnap local acquiring in 47.

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