Benefits of Winning a Chargeback Dispute
By Chris Alarie on Feb 18, 2021
Winning isn’t everything, it’s the only thing.”
--Vince Lombardi
Taking cues from our sports heroes, Americans place a significant moral and ideological value on winning. Even if Lombardi later came to regret the way his famous quote had been interpreted, the lasting influence of that interpretation remains. To succeed is to win, in every arena.
For merchants, one of the most important contests to be won is the chargeback dispute. For reasons ranging from the practical to the symbolic, from fiduciary to reputational, a merchant who disputes a chargeback stands to gain much from a win. But what specifically are the benefits of winning a chargeback dispute? This article answers that question.
What Is a Chargeback Dispute?
A chargeback is a mechanism for returning payment to a customer after a disputed credit or debit card charge. Unlike a refund, a chargeback does not involve the direct communication of customer and merchant but, rather, involves communications between their respective banks (issuer and acquirer).
A merchant has the option of disputing a chargeback if they believe it was filed in error or is an attempt at fraud. The shape and pathway of a chargeback dispute varies considerably depending on the details of the transaction but generally involves a series of steps in which information is exchanged among the various involved parties—merchant, acquirer, consumer, issuer, and card brand.
A merchant that disputes a chargeback will have to pay operating costs and fees, regardless of the dispute’s outcome. Depending on the card brand and dispute workflow, the money may be removed from the merchant’s account during the process of the dispute, only to be returned in the event that the dispute is resolved in the merchant’s favor.
How Do I Win a Chargeback Dispute?
Due to recent regulatory changes, filing for a chargeback is significantly easier than it once was. As a result, the burden of proof has shifted toward merchants disputing chargebacks rather than the consumers filing them. Successfully disputing a chargeback requires spending on operational costs, knowing how to navigate the complex chargeback dispute systems, and being able to find and present the necessary supporting evidence.
It is certainly possible to win chargeback disputes and, especially in cases of obvious chargeback fraud, having a strategy for disputing the most egregious chargebacks is an essential part of any merchant business. But the simple fact is chargeback disputes are difficult to win.
What are the Benefits of Winning a Chargeback Dispute?
A merchant who wins a chargeback dispute recovers the money from the transaction. Also, depending on the specific route to that chargeback win, the merchant may be able to compel the consumer to pay some of the fees associated with the dispute.
Winning is the most important thing in my life, after breathing. Breathing first, winning next.
--George Steinbrenner
More abstractly but no less importantly, a merchant who wins a chargeback dispute protects the reputation of their business. According to LexisNexis, consumers who have successfully received a chargeback are nine times more likely to file another one than those who haven’t. Serial fraudsters are always looking for easy targets. By defending against a fraudulent chargeback, a merchant demonstrates that they are not a mark.
What is the Cost of Winning a Chargeback?
While winning a chargeback dispute certainly has its benefits, it also has significant costs. Those include literal costs, covering such things as operating costs and fees that may be paid even for a winning dispute. Ethoca estimates that 60% of merchants’ chargeback costs are from operational costs. But there are more indirect costs that affect a merchant when they receive a chargeback, regardless of the outcome of any chargeback dispute. These indirect effects can be unquantifiable damages such as brand damage or distinctly quantifiable damages such as an increased chargeback ratio—something that is calculated based on chargebacks requested, regardless of the merchant’s win rate.
Winning a chargeback dispute is unquestionably preferable to losing a chargeback dispute. But the literal and figurative costs of all chargebacks make it so that the only way to truly win a chargeback dispute is to prevent the chargeback before it happens. While it is impossible to prevent every chargeback, there are a wide variety of techniques, procedures, and tools that every merchant can do to reduce the frequency of chargebacks and even to catch payment disputes and resolve them before they become chargebacks.
Next Steps
Start winning chargebacks now with our comprehensive chargeback management tools and in-depth analytics.
A champion needs a motivation above and beyond winning."
--Pat Riley
MidMetrics is expertly designed to be easy to use, and it requires minimal IT effort for merchants to implement. It integrates with payment processors, gateways, CRMs, and service providers via API, and uses secure credentials to establish direct connections with card networks and banks. On the user end, MidMetrics automatically gathers and aggregates relevant data from all available sources, normalizing and presenting it in readable reports that present clear and actionable insights to merchants.
