Why Merchants Never Really Win Chargeback Disputes

Jennifer Blake Posted on November 04, 2020

1. Biased system

When chargebacks are filed, there isn’t an onus on customers to prove why their claim is valid. Instead, merchants must defend the legitimacy of payment for their goods or services. The merchant’s disadvantage is represented in the fact that chargebacks are automatically sent back to the customer from their bank or credit card company. The out-of-pocket merchant must prove why money should be sent back to them, already putting them at a disadvantage.  

2. Low chance of winning

Unfortunately, chargeback management is an unpleasant reality of doing business in the 21st century. Card networks report that merchants win only about 21% of chargeback payment disputes. 

Fighting a chargebacks means entering ‘the representment process’. This involves citing specific evidence that helps proves that the customer’s claim is invalid or illegitimate. If there is a reversal of the chargeback, funds are deposited back into your account. However, despite whether you enter the representment process or simply accept the chargeback, you are responsible for the fees and admin cost incurred during the chargeback process. The customer is not responsible for any fees at all, even as a result of a wrongful chargeback claim. 

Some merchants may choose, based on the low success rates, not to contest a chargeback claim. Larger companies can afford to see it as part of the cost of doing business, whereas smaller ones are more likely to suffer as a result. However, this has long-term negative consequences on consumer behaviour. It reinforces the idea that customers can easily file for a chargeback when they don’t receive a satisfactory outcome when requesting a refund. 

3. Winning still costs in chargeback fees

While this option protects consumers, it also allows people with intentions to commit fraud to do so without any real consequences. If a chargeback is reversed, the only punishment a customer suffers is paying the price of the product or service. Figures show that consumers that successfully file a chargeback dispute are likely to file another one within 90 days. Take a look at our tips on fighting payment disputes.

Payment Help can help you with chargeback management by allowing customers to identify unrecognised payments on their bank statements. This will go a long way to reduce the instances of accidental filing of chargebacks (also called ‘friendly fraud’), which can impact your business’ profitability and credit score.