What is a chargeback? 

A chargeback is a financial transaction reversal that occurs when a customer disputes a charge made to their credit card or other payment method. When a chargeback is initiated, the customer’s issuing bank investigates the claim and may temporarily return the disputed funds to the customer’s account, pending resolution of the dispute.

Chargebacks can occur for various reasons, such as fraudulent activity, goods or services not being delivered as promised, or billing errors. Chargebacks can be costly for businesses, as they not only result in a loss of revenue but also often incur fees. 

In 2021, merchants lost an estimated $100 billion due to chargebacks globally. This number is expected to continue to rise in the coming years, driven by factors such as the increased use of online and mobile payments, and the growing sophistication of fraudsters.

Furthermore, a survey by The Strawhecker Group found that in 2020, chargeback rates increased by 23% for eCommerce merchants, as more consumers shifted to online shopping due to the COVID-19 pandemic.

These statistics highlight the importance of businesses taking proactive steps to prevent chargebacks, such as implementing fraud detection and prevention tools, providing clear product descriptions and policies, and offering excellent customer service to address any issues or disputes promptly.