Chargeback Management

𝗖𝗵𝗮𝗿𝗴𝗲𝗯𝗮𝗰𝗸𝘀, 𝗥𝗲𝗳𝘂𝗻𝗱𝘀, 𝗮𝗻𝗱 𝗥𝗲𝘃𝗲𝗿𝘀𝗮𝗹𝘀 Merchants and folks in payments often use these terms interchangeably when they’re actually very different. Confusing them can cost time, money, and customer trust Let’s break it down 👇 𝗪𝗵𝗮𝘁 𝗧𝗵𝗲𝘆 𝗔𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗠𝗲𝗮𝗻 𝗥𝗲𝗳𝘂𝗻𝗱 → A merchant-initiated return of funds to the customer. The sale is reversed at the merchant’s discretion (product return, service issue, goodwill) ▪️Customer asks merchant directly ▪️Handled via acquirer → issuer → customer ▪️Generally cheaper and faster than a chargeback 𝗖𝗵𝗮𝗿𝗴𝗲𝗯𝗮𝗰𝗸 → A cardholder disputes a transaction with their bank. The issuer pulls funds from the merchant, pending investigation ▪️Customer bypasses merchant ▪️Higher fees + penalties for merchant ▪️Impacts chargeback ratio (risk of being flagged by Visa/Mastercard) 𝗥𝗲𝘃𝗲𝗿𝘀𝗮𝗹 → A transaction is cancelled before settlement ▪️Merchant or issuer prevents funds from being finalized ▪️Typically happens due to fraud detection or technical error ▪️Least damaging for both merchant and customer 𝗧𝗵𝗲 𝗠𝗲𝗿𝗰𝗵𝗮𝗻𝘁 𝗜𝗺𝗽𝗮𝗰𝘁 → Refunds are under your control — but too many can signal product/service issues → Chargebacks are expensive — fees, lost goods, higher risk categorization → Reversals are cleaner — but usually out of merchant control, triggered by banks or fraud systems The danger is confusing which is which. If your ops team treats chargebacks like refunds, you’ll miss the dispute deadlines and lose every case by default 𝗥𝗲𝗮𝗹-𝗪𝗼𝗿𝗹𝗱 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 You run a subscription service: 1️⃣ Customer forgets they subscribed → files a dispute → becomes a chargeback (with fees + ratio hit) 2️⃣ If they had come to you first, you could have issued a refund (avoiding the chargeback entirely) 3️⃣ If your fraud system flagged their transaction instantly, it could have been a reversal (never impacting revenue at all) 𝗦𝗼 𝗪𝗵𝗮𝘁’𝘀 𝘁𝗵𝗲 𝗦𝗼𝗹𝘂𝘁𝗶𝗼𝗻? ▪️Educate support teams → ensure they understand the difference ▪️Encourage refunds before disputes — better CX + fewer chargebacks ▪️Invest in fraud prevention → more reversals, fewer downstream problems ▪️Track ratios closely → Visa and Mastercard monitor merchant chargeback levels 𝗙𝗶𝗻𝗮𝗹 𝗧𝗵𝗼𝘂𝗴𝗵𝘁 Refunds, chargebacks, and reversals may sound similar, but the differences matter. For merchants, understanding them isn’t just semantics — it’s the difference between managing risk and being blindsided by fees, penalties, and damaged reputation. The clearer your teams are, the stronger your payments strategy will be Source: Pagos, Visa, Chargebacks911 🔔 Follow Jason Heister for daily #Fintech and #Payments guides, technical breakdowns, and industry insights

Chargebacks 101: the part of payments nobody explains When you start accepting payments… Nobody warns you about this. But it can quietly destroy your margins. 🤓 What is a chargeback? A chargeback is a forced refund initiated by the customer’s bank. Not a normal refund. 👉 It involves: the customer the issuing bank the card network (Visa / Mastercard) the acquiring bank And you… the merchant. And... (the worst part), you usually find out when the money is already gone. ⚙️ How it works (when used properly) Legitimate case: Customer spots an issue (fraud, product not received, wrong charge) Contacts their bank The bank initiates a chargeback A dispute process starts The merchant can respond (representment) 👉 If the merchant proves the transaction was valid → funds can be recovered 👉 If not → money is lost + fees applied ✔️ It’s a consumer protection mechanism ✔️ It builds trust in the payments ecosystem 🚨 How it’s actually used (in many cases) Here’s the uncomfortable truth: 👺 “Friendly fraud” The customer: received the product ✔️ used the service ✔️ and still disputes the transaction ❌ Typical reasons: “I don’t recognize this charge” Avoiding refund processes Pure abuse of the system 💥 Result: Merchants lose revenue… even when everything was done right. 📊 The data you should not ignore 60%–80% of chargebacks are friendly fraud For every €1 disputed, merchants lose €2–€3 in real cost (product + logistics + fees + operations) Critical thresholds: ~0.9% → early warning zone >1% → monitoring programs (Visa/Mastercard) >3% → potential account termination Resolution time: 👉 30–90 days And the biggest problem: 👉 most merchants don’t fight them 🧠 The biggest misconception Chargebacks are not “part of doing business”. They are a core KPI. 🛠️ How to actually reduce them It’s not just fraud prevention. It’s experience + control: ✔️ Clear product/service descriptions ✔️ Recognizable billing descriptors ✔️ Strong customer support ✔️ Smart use of 3DS (not everywhere) ✔️ Tokenization & recurring payment control ✔️ Proper evidence management 👉 And above all: measure everything. You can optimize your fees. You can improve your checkout. But if you don’t control your chargebacks… you’re losing money without realizing it. 🚀 What’s next This is just the beginning. Chargebacks behave very differently depending on the industry: ✈️ Travel 🚗 Mobility / Car rental 🛍️ eCommerce 🎟️ Ticketing I’ll break them down by vertical in upcoming posts. If you made it this far… 💬 Do you know your current chargeback ratio? 📊 And your real cost per dispute? #Payments #Fintech #Chargebacks

A Chargeback Isn’t Just a Refund A chargeback is a formal dispute, not a simple reversal. It’s the moment a customer challenges a transaction, and the merchant must prove it was valid, or absorb the loss. And here’s the part most merchants don’t realize: By the time you hear about a chargeback… 🔹 The funds are already gone 🔹 The fee has already been applied 🔹 Your chargeback ratio has already increased At that point, you’re no longer preventing damage. You’re responding to it. What actually happens behind the scenes 1. Customer files a dispute The cardholder contacts their issuing bank to contest a transaction they believe is incorrect, unauthorized, or unresolved. 2. Issuer pulls funds from the acquirer Once the dispute is accepted, the issuer provisionally reverses the transaction. The merchant is debited immediately, before any evidence is reviewed. 3. Card network steps in Visa, Mastercard, or Amex routes the dispute and enforces strict rules, reason codes, and deadlines. 4. Acquirer notifies the merchant The merchant receives the chargeback notice, including the reason code, and can either accept or challenge it. 5. Merchant gathers evidence Delivery confirmation, policies, usage logs, and customer communication are collected to support the transaction. 6. Evidence goes back through the network This stage is called representment. The issuer reviews the documentation via the card network. 7. Issuer makes the final decision If the evidence is accepted, funds are returned. If not, the loss becomes final. Chargebacks aren’t just operational noise. They’re costly, time-consuming, and risk-signaling. Left unmanaged, they can lead to higher processing costs, monitoring programs, and even account termination. That’s why dispute management isn’t optional; it’s part of running a sustainable payment operation. How merchants reduce exposure ➡️ Use 3DS, AVS, and CVV checks ➡️ Log delivery data, policies, and customer communication ➡️ Respond quickly to disputes ➡️ Route traffic intelligently based on risk signals ➡️ Work with processors that understand your business model Chargebacks aren’t a customer service issue. They’re a systems issue sitting at the intersection of fraud, operations, and risk. Are you managing chargebacks or just reacting to them? #Payments #Fintech #Chargebacks #PaymentProcessing #MerchantRisk #CardNetworks #DigitalPayments #BankingExplained

I met with one of our recent customers, a software platform at $10mm+ ARR and offering embedded payments. They are scaling fast and moving to a multi-processor setup (e.g., using both Stripe and Adyen) to handle different regions and risk profiles. Here is the massive risk we identified in their "blind spots" 🫠 The Scenario: A fraudster they previously caught and banned on Processor A (Stripe) re-applies to the platform. Because the platform treats these processors as silos, the system doesn't recognize them and boards them onto Processor B (Adyen). They’d never know it was the same bad actor until the chargebacks hit 😭 Here is the advice I gave them to fix this visibility gap: 1. Unify your data into a single pane of glass. Stop logging into Stripe Dashboard, Adyen, and others separately. You need a system that ingests data from all your processors and normalizes it. You need to search for a merchant and see their history regardless of which rail they were boarded on ✅ 2. Play "connect-the-dots" across processors. You must be able to see hidden relationships across the entire portfolio. If a new applicant shares a bank account, email, or device fingerprint with a "bad" account you shut down on Stripe last year, you need to know before you board them on Adyen 🫡 (We've had many clients get saved by our feature, Account Graph, which does exactly this.) 3. Stop the manual "detective work." Support teams are still manually validating onboards - Googling addresses, checking social, etc. It doesn't matter which processor handles the payment; the underwriting bottleneck is the same 😔 My advice: Automate it 🤖 1. Auto-pull Google Street View + AI to verify if it's a real business 📍 2. Auto-scrape websites and social profiles to verify identity 💻 3. Auto-check adverse media to spot reputational risks 📉 4. Automate the 90%, manually review the 1%. Create global rules that sit above the processor level. If an applicant is linked to a previously banned account on any processor, auto-reject them. Free your team from the noise so they can focus on the complex cases 🔥 Their goal was to replace fragmented tools with one source of truth. That's the right move, and Coris is happy to help 🙌

How Chargeback Thresholds Influence Payment Access in SexTech Chargeback ratios have an outsized effect on payment access in SexTech. Data shows that small increases above network thresholds can trigger disproportionate restrictions, regardless of overall revenue performance. What the Data Shows 1. Threshold breaches trigger cascading restrictions Card networks typically flag accounts when chargebacks exceed 0.9 percent of transactions or 100 disputes per month. Crossing either threshold increases the likelihood of rolling reserves, higher fees, or account termination. 2. Disputes concentrate around specific failure points Chargeback analysis shows clustering around unclear billing descriptors, delivery delays, and unmet expectations. Addressing these points reduces overall dispute volume without changing traffic mix. 3. First time buyers account for most disputes Dispute data indicates that 60 to 75 percent of chargebacks originate from first time customers. Repeat buyers rarely dispute when expectations are set correctly. 4. Prevention has a higher ROI than recovery Preventive measures such as clear descriptors, proactive delivery communication, and education reduce disputes more effectively than post dispute recovery tools, which often recoup less than 20 percent of contested funds. Why This Matters in Sexual Wellness Payment access in SexTech is fragile relative to other categories. Even modest dispute increases can disrupt processing continuity and distort growth metrics. V For Vibes benefits from monitoring dispute ratios in near real time, aligning billing clarity and delivery communication to keep chargebacks below network thresholds and maintain processor stability. Chargeback management functions as payment infrastructure control. In SexTech, maintaining ratios below enforcement thresholds is necessary to preserve uninterrupted revenue flow and accurate performance measurement.

Chargebacks Aren't a Fraud Problem. They're a document-processing problem costing merchants between $4.61 and $5.00 for every $1 in fraud, according to LexisNexis data from 2025. The chargeback problem has always been the same. It's not that merchants lack evidence. It's that assembling it manually under the card network's deadlines is nearly impossible at scale. A significant chunk comes from chargebacks: disputes where merchants had the evidence to win but couldn't pull it together fast enough. The evidence exists. Transaction logs, customer emails, policy documents, purchase confirmations, support tickets. It's scattered across systems, all in unstructured formats. When a chargeback lands, someone has to manually dig through it all and build a defense case before the clock runs out. Most disputes get abandoned not because the merchant was wrong, but because nobody could find the proof in time. So how do you solve it? One way is to use what I call Infrastructure-as-a-Springboard. For example, take justt, the chargeback platform. Instead of reinventing the wheel, they used NVIDIA's Nemotron Parse model to build a solution for this exact problem. Using Nemotron Parse, they built a solution that is able to ingest unstructured data at scale, PDFs, emails, transaction records, policy docs, and automatically extract the relevant evidence based on what card networks actually require to win disputes. justt.ai is already running this in production. They've automated the full chargeback lifecycle using Nemotron Parse to process transaction data, customer interactions, and merchant policies, then assemble dispute-specific evidence packages that align with Visa and Mastercard requirements. So what makes this different from older approaches? Traditional chargeback tools rely on templates and manual uploads. NVIDIA's Nemotron Parse model reads the actual documents, understands context, connects disparate data sources, and builds the case automatically. It's the difference between asking someone to fill out a form and having the system pull everything you need without you having to touch it. NVIDIA's 2026 State of AI in Financial Services survey backs this up. Document processing is the number one ROI use case across financial institutions at 32%. Higher than fraud detection. Higher than customer service automation. That tells you where the actual revenue leakage lives. The companies figuring this out first aren't just recovering more chargebacks. They're flipping the economics. What used to require a team manually processing disputes now runs automatically at a fraction of the cost, letting you fight disputes you used to write off as not worth the effort. So if you are a PSP or Acquirer, instead of focusing only on Agentic use cases, make sure you also consider how new AI models can help you improve your payment operations. And if you want to know how, feel free to reach out. I've been doing it for over 20 years.

Most people don't know how money actually moves. I see this often with new customers. They sign up for payment processors with no idea what's happening behind the scenes. Truth is: payment technology is complex as hell. Our team learns something new about payments literally every day. There's always that new edge case or regulatory quirk nobody told you about. This is why we've built education into our core approach. Yeah, we provide payment tech, but we also spend time teaching merchants how these systems work. I remember one marketplace customer was convinced their chargeback problem was unfixable. They'd been told by another provider to just accept the 3% loss rate. After a 30-minute call explaining how card networks actually flag transactions and proposing our chargeback prediction product as a potential solution, we helped them implement changes that cut that rate to less than 0.5%. For any business where digital payments make up significant revenue, not understanding the system is risky. You're flying blind, making decisions without seeing half of the instrument panel. We don't expect every client to become a payment expert – that's literally OUR job. But we do make sure they understand enough to make smart decisions about their money movement. Because transparency isn't just nice to have – it directly improves your bottom line. The real value isn't just in pushing transactions through. It's making you smart enough to optimize them.

A non-obvious consequence of recent data breaches: A spike in fraud false positives and chargebacks. It seems that there's a new headline about a data breach every week. While these are incredibly significant and can lead to the use of stolen identities, they often lead companies to overcorrect. Bad actors often use stolen identities to " credential stuff" to buy products or use sports betting websites. 👉 When the good user sees this, they'll issue a chargeback, which costs the merchant. Their fraud tools and PSP approved what looked like a good transaction but ended in high costs and a loss. This revenue never attached. 👉 Worse, as a reaction many fraud tools and PSPs are increasingly declining transactions instead of offering step-up verification, or looking for additional signals of good users before declining. All of this creates lost revenue, lost opportunity and bad customer experiences. In the age of data breaches we need a better solution 🐟 Look for more signals pre-auth from this user, not just their geolocation, but their device and behavior on their device. Is this a returning user? Does this look more like a good user than a bad user? If the pattern of behavior is closer to good, it's likely lower risk. 🐟 Offer step-up verification. In a high-risk transaction, look for additional authentication like One-time Passcodes; if you have a mobile app via a push notification, this is a high strength. Especially valuable for high-risk sectors like gaming and sports betting. 🐟 Scan for known stolen credentials and onboarding and during the customer lifecycle. Sardine's Sonar service scans the dark web for recently breached credentials and can validate if the credentials given are potentially stolen. Note, given the sheer volume of stolen credentials, that's not always bad. In fact, a credential that does not appear in a breach may be synthetic. It's always critical to look at the data, back-test and iterate to find the balance of conversion and fraud risk."

You asked, I listened. Here is my Guide to Navigating Airbnb Chargebacks. I will have to break it up between the original post and a comment. 🚨 Why Hosts Should Care About Airbnb Chargebacks When a guest disputes a charge with their bank, Airbnb is notified—not you. But if the bank sides with the guest, Airbnb may: • Reclaim the funds from your payout—even after a completed stay • Withhold future payouts to cover the lost money • Not involve you at all in the chargeback process This can happen even if the reservation went smoothly and the guest left a glowing review. ✅ How to Reduce Chargeback Risk as a Host Listing on Airbnb 1. MAINTAIN CLEAR, ACCURATE LISTINGS • Ensure your photos and descriptions match the actual condition of the home. • Include disclaimers for ANYTHING guests may perceive as “unexpected” (e.g., road noise, stairs, pets, off-grid features). • Avoid exaggeration—disappointed expectations are a top trigger for disputes. 2. COMMUNICATE EVERYTHING IN-PLATFORM • Use the Airbnb messaging system to document: • Check-in/check-out instructions • Guest requests and your responses • Any issues, complaints, or resolution steps • If guests communicate via text, summarize the conversation in Airbnb messages. 3. DOCUMENT YOUR CHECK-IN AND CHECK-OUT PROCESS • Take time-stamped photos or video of the home before check-in and after check-out—especially for high-risk bookings. (There are several red flags to look for. I may put out another post about that.) • For damage or violation disputes, this documentation may be your only line of defense. • Use the fields in the Airbnb platform for clearly outlining your check-in and check-out policies and procedures. 4. KEEP RECEIPTS AND RECORDS FOR ADD-ONS OR FEES • If you charge guests for additional services (like pet fees, extra cleaning, or late checkout), clearly communicate and document consent in the Airbnb inbox. • If the guest disputes a charge, Airbnb may ask you to produce documentation—even months later. 5. AVOID OFF-PLATFORM PAYMENT REQUESTS • Never ask guests to pay you directly (e.g. via Venmo, Zelle, PayPal) for anything related to their Airbnb stay. • Airbnb prohibits it—and doing so removes any chance of support if things go wrong.* 6. REPORT ISSUES RIGHT AWAY • If something goes sideways (e.g., guest damages, early departure, fraud concerns), notify Airbnb through the Resolution Center or Safety team immediately. • This timestamps the event and shows you acted promptly, which may help if Airbnb gets involved in a dispute later. Always ask the support ambassador to include a case number. 7. USE A SMART KEYLESS ENTRY SYSTEM WITH LOGS • These systems give you a time-stamped record of entry/exit, which can help prove guest presence in the event of a chargeback. • Cameras, while controversial, could also help. See more in the comments...

You finally got the Retailer deal you've been dreaming of. Your brand is on shelves. You're already planning how to spend that first big check. Then the invoice arrives. You shipped $100K worth of product. You're expecting $50K (standard wholesale is 50% of retail). The check is $32K. What happened? Welcome to retail chargebacks. The hidden tax nobody warns you about. Here's what ate your margin: • Shortage claim: $2,400 (damaged pallets) • Late delivery fee: $1,800 (2 days late) • Non-compliance charge: $3,200 (label placement) • Routing error: $1,600 (wrong carrier) • Markdown allowance: $9,000 (buried in contract) That's $18K in deductions on a $50K order. Your margin just dropped from 50% to 32%. And this is normal. Most first-time founders budget for wholesale pricing but forget about: • Damage allowances (2-5% of shipment) • Promotional funding (10-20% of sales) • Compliance penalties ($500-5K per violation) • Freight claims (transit issues) Before you sign that purchase order, request the vendor compliance guide. It's usually 40+ pages of fees you need to know about. Model these costs into your pricing upfront. That dream retail deal can quickly become a cash flow problem if you don't. Your 65% gross margin? In retail, expect closer to 35% after chargebacks. Three things to do now: 1. Review compliance requirements before shipping 2. Build chargeback estimates into your financial model 3. Add 5-10% buffer to your retail pricing This isn't meant to scare you. It's meant to prepare you. Retail can be incredibly profitable when you plan for the real costs, not just the wholesale price.