Running a business is hard enough without having to deal with disputes and chargebacks. You may assume that most transactions simply pass through with no issues, but a surprising number cause problems, especially for high-risk businesses. When this happens, the risks go far beyond simply losing a little revenue. They reverberate into confidence issues, regulatory problems, and payment processing headaches.
To give you an idea of the sheer size of this problem, in 2023 alone, the chargeback rate was in excess of 238 million, and out of those, merchants only won an average of 45%. That’s 55% of lost chargeback disputes that result in lost revenue, fees, and reputational damage.
The most frustrating thing about all of this is that the same study found that friendly fraud is responsible for 70% of chargebacks. Put simply, it’s easier than ever before to file a chargeback with an issuing bank. A study by Mastercard found that chargebacks cost merchants around $117.47 billion in 2023 alone, and that doesn’t take into account the sophisticated types of credit card fraud currently emerging.
Let’s take a deeper dive into the shocking world of chargeback statistics, and understand what we can do to alleviate the problem.
TL;DR
- Chargebacks are increasing in frequency and complexity, affecting businesses across all sectors and sizes. There were 238 million chargebacks in 2023 alone.
- Industry-specific trends show higher chargeback rates in eCommerce, travel, and digital goods, with fraud and customer disputes being top drivers.
- Effective dispute resolution hinges on detailed evidence, timely responses, and a deep understanding of issuer requirements. Merchants win only 45% of chargebacks on average.
- Emerging technologies like AI, machine learning, and blockchain are helping businesses better predict and prevent chargebacks.
- Chargeback trends vary globally, influenced by local regulations, consumer behavior, and payment infrastructure.
- Different payment methods carry different levels of chargeback risk — card not present tops the list, while digital wallets and A2A payments tend to have lower rates.
- Regulatory frameworks around chargebacks are evolving, pushing for greater transparency, fairness, and standardization across regions.
The Chargeback Landscape: More Than Just Numbers
Understanding chargeback rates helps businesses create a robust dispute prevention plan.
Source: Pexels
Before we can assess the numbers, we need to understand the full chargeback picture. The most important thing to consider here is that the chargeback rate isn’t linear across the board; specific industries experience higher rates than others. In many cases, this leads businesses to request specific high-risk merchant accounts to overcome the payment processing problems that chargebacks cause.
Some industries are simply more susceptible to fraud than others, and a higher instance of chargebacks could result in that dreaded high-risk status. Studies show that whenever disputed transactions exceed 1% of total transactions, Visa or MasterCard looks to assign them as high-risk. What does this mean? Higher fees, restrictions and blocks by many payment processors. A need for sophisticated fraud detection systems.
It’s even more frustrating when you realize that 53% of cardholders opt to dispute a charge with their bank rather than first going to the retailer to resolve the problem. It’s a lost opportunity to avoid a dispute in the first place, leading to higher chargeback statistics over time.
The Ripple Effect of Chargeback Rates
Chargeback rates aren’t just frustrating, they have an effect on many different aspects of how a business is run. We’ve already touched on the fact that payment processors may deem a business high-risk if their chargeback rates exceed 1%, and in some cases, this can also lead to costly penalties.
At PayCompass, we’re focused on helping businesses reduce their chargeback rate to ease the waters and make life easier. Our guide to e-commerce chargeback prevention has a wealth of information available, while our merchant accounts all come with built-in chargeback prevention. Ultimately, prevention is always better than cure.
The Psychology Behind Chargeback Rates
One aspect to help prevent chargebacks is understanding the psychological factors that drive a customer to file a chargeback. This can form the bedrock of your chargeback prevention strategy, allowing you time to take proactive steps before a problem occurs.
Studies have shown that 65.3% of friendly fraud cases are a result of buyer’s remorse, i.e., when a customer makes a purchase and then regrets it later on. This could be because they’re not satisfied with the product or service or that they make an impulsive purchase at the start. It’s also clear that education is key, as the same study showed that 72% of customers are unclear on the difference between a refund and a chargeback.
In many cases, convenience plays a part; 81% of customers admit to filing a chargeback simply because it was easier than contacting the merchant and arranging a refund.
A little later, we’ll talk about how to resolve chargeback disputes, but working to avoid them in the first place is always a better route. To help in this situation, clear billing descriptions are key, along with well-defined refund policies, and perhaps an extended refund time frame.
Chargeback Rates as Economic Indicators
During troubling economic times, it’s normal for chargeback rates to increase. This is because customers become more sensitive to prices and try to save more than purchase. This also reflects in many chargeback statistics, giving insights into consumer confidence and spending patterns at any one time.
We can also appreciate fluctuations across seasons, particularly in the travel industry. In these cases, businesses often access travel agency merchant account services to overcome the issues that seasonal fluctuations cause. E-commerce businesses are affected by seasonal changes too; around major holiday periods, spending is usually more than after, e.g. Christmas and New Year.
The table below gives some useful insights into economic factors and their impact on chargeback rates.
| Economic Factor | Impact on Chargeback Rates |
| Recession | 15-25% increase |
| Holiday Season | 20-30% spike post-holidays |
| GDP Growth | 5-10% decrease per 1% GDP growth |
| Unemployment | 8-12% increase per 1% unemployment rise |
The Hidden Costs of Chargebacks
There are obviously monetary costs in relation to chargebacks, and these can be significant as they add up over time. Recent reports show that Americans disputed $65.214 billion credit card charges in 2023 alone, averaging 5.7 per cardholder, each around $76 in value. The cost of those for each merchant is staggering. Yet, it’s not just money we need to consider, it’s time and effort too.
The Time Sink: Administrative Burden of Chargebacks
Dealing with chargebacks takes resources and time, both of which also equate to money. The number of chargebacks a business experiences depends heavily on the type of industry it’s in; we’ve already mentioned that high-risk businesses have more chargebacks on average.
In these cases, businesses may choose to have a team specifically dedicated to dealing with chargeback administration. However, studies show that 61% of chargeback teams only have an average of 1-3 staff. Within that, each dispute can take 2-3 hours to assess, gather evidence, and respond to each chargeback. High-risk businesses in particular must look toward dispute management services to streamline operations and focus their attention on business growth rather than dealing with chargeback issues.
Reputation Ramifications: The Long-Term Impact of High Chargeback Rates
Of course, regular chargebacks can also affect a business’ reputation, potentially leading to lost custom. Yet, it goes beyond even that. We’ve already established that businesses with over 1% chargeback rates are deemed high-risk, and this may lead them to lose their regular payment processing accounts, leading them to seek specialized options instead.
Here at PayCompass, we’re your safety net. We fully understand the issues you face, and our tailored merchant accounts are designed to overcome the challenges you’re no doubt growing tired of.
The video below gives some useful tips on how to reduce chargeback rates and maintain a positive reputation.
Industry-Specific Chargeback Insights: Beyond the Averages
Certain industries have a higher chargeback rate than others. In this section, let’s explore some of the most interesting cases, and unveil the challenges they face.
High-Risk Industries: Navigating the Chargeback Minefield
The industry standard chargeback win rate is low for high-risk businesses.
Source: Pexels
There are many reasons why high-risk industries face higher chargeback rates than those deemed low-risk, and they vary across the board. For instance, it could be the nature of the goods or services they provide, perhaps it’s due to their seasonal business nature, or it could simply be that they’re based heavily online and therefore deal with increased friendly fraud. Whatever the specific reason for each business, it’s a challenging picture, and one that requires careful prevention and growth strategies.
For instance, the travel industry alone faced around $25 billion in chargebacks in 2023. In this situation, many transactions are high-volume and there are seasonal issues to take into account. It’s also important to note that the travel industry deals with many cancellations due to weather problems and itinerary changes. All of this adds up to a staggering chargeback rate.
The table below gives some eye-opening insights into average chargeback rates per industry.
| Industry | Average Chargeback Rate | Key Risk Factors |
| Education | 4.79% | Course quality, intangible services |
| Travel | 4.68% | Cancellations, overbookings |
| Digital Goods | 3.62% | Ease of fraud, buyer’s remorse |
| Gaming | 3.41% | Addiction issues, unauthorized use |
| Health/Beauty | 2.73% | Product efficacy claims, subscriptions |
The Art of Chargeback Dispute Resolution
Chargeback prevention and dispute resolution is a vital piece of the overall puzzle, helping businesses fight unfair chargebacks and win, rather than paying out large amounts in fees and lost time. However, the chargeback statistics in this case are quite grim. Studies have shown that 40% of companies identify a target chargeback rate of 0.1%, but less than 20% actually achieve it. We’ve already talked about the fact that merchants win only 45% of disputes on average.
Yet, it’s not all negative news. We’ve talked a lot about the chargeback situation across the board, but now let’s get proactive. In this section, we’ll talk about chargeback win rates and how to improve them with quality dispute resolution tactics.
Beyond the Industry Standard: Exceptional Dispute Win Rates
While disputing a chargeback is a difficult process, some businesses manage to achieve exceptional chargeback win rates, often above the industry average. Assessing the tactics and strategies used by these organizations is key in helping to shape a successful strategy for each high-risk business.
The Role of Data in Chargeback Disputes
One way to successfully challenge a chargeback is to use all available data. This includes transaction information, customer history, and any other metrics you have to build a strong case. Data-driven approaches are particularly successful because they’re proven and have a strong paper trail through digital record-keeping.
Automation and AI in Dispute Resolution
Automation and AI are exceptionally useful in dispute resolution, not only helping to boost the industry standard chargeback win rate but also streamlining the entire process.
In fact, a World Bank study discovered that utilizing AI-driven dispute resolution tactics can help reduce manual review times by up to 70%. Automated dispute resolution platforms can also help increase win rates due to consistent and timely responses, while machine learning algorithms can predict the likelihood of a dispute before it even happens.
The Human Element: Customer Service's Impact on Dispute Rates
Of course, we can’t automate and digitize everything. There is still a very strong role to be played by humans, especially in customer service. When it comes to handling disputes, the human touch goes a long way.
However, rather than looking at reactive customer support, it’s best to opt for proactive versions instead. This means preemptive resolution and identifying areas where customers may not be entirely satisfied. All of this goes a long way to reducing dispute and chargeback rates in general.
Future-Proofing Against Chargebacks: Emerging Technologies and Strategies
As technology constantly evolves, so does the payment processing and fraud prevention landscape. All of this goes a long way toward preventing chargebacks as much as possible, with many innovative approaches on the horizon.
For instance, using EMV chip technology has reduced card-present fraud by 76%, a huge development in fraud prevention. Additionally, biometric authentication methods have shown huge promise in helping to identify and reduce fraudulent transactions. In fact, 42% of financial institutions noticed a drop in payment fraud after utilizing biometric authentication.
Blockchain and Cryptocurrencies: A New Frontier in Dispute Prevention
Blockchain technology and cryptocurrencies are at the forefront of financial technology and they offer a range of benefits. These include more secure payment methods, including irreversibility. It’s thought that blockchain-based transactions can reduce fraud due to their immutability, while smart contracts are another useful addition that add automation to the picture, therefore saving time dealing with chargebacks.
Smart Contracts: Automating Dispute Resolution
Let’s dig a little deeper into smart contacts. These are extremely promising in terms of changing how we deal with disputes and reducing chargeback rates, due to their automated nature.
One example is using escrow systems with smart contracts. Traditional escrow methods use intermediaries and take extra time, while the manual element adds the risk of error or fraud. However, smart contracts can completely automate the process, so funds are only released when predefined conditions are met. Over time, this reduces the chance of disputes and reduces the final chargeback rate.
Biometric Authentication: The Next Line of Defense
We briefly mentioned the effectiveness of biometric authentication in reducing fraud and chargeback instances, but let’s delve deeper.
A study published in the American Journal of Applied Sciences showed how effective multi-factor biometric authentication can be. When combining fingerprints and facial features, the results showed a 99.8% recognition rate, with a false rejection rate of only 1%.
Overall, biometrics seem to be an exceptional tool in battling fraud and chargeback ratios.
Geographical Variations in Dispute Patterns
Chargeback rates vary from region to region due to regulatory issues and laws.
Source: Pexels
It’s interesting to explore how chargeback statistics and rates change across geographical areas. The table below gives some fascinating insights based on recent studies:
| Country | Chargeback rate |
| Brazil | 3.48% |
| Mexico | 2.81% |
| Russia | 0.82% |
| France | 0.65% |
| Germany | 0.54% |
| Belgium | 0.54% |
| United Kingdom | 0.52% |
| United States | 0.47% |
| Netherlands | 0.40% |
| Spain | 0.24% |
| China | 0.18% |
| Japan | 0.18% |
Cross-Border Transactions: A Dispute Conundrum
Within this subject, we can also highlight cross-border transactions. Thanks to the Internet, the world has become much smaller, and it’s possible to purchase goods and services from countries extremely far away. However, this also includes multi-currency issues and a higher risk of fraud. In fact, a report by the European Central Bank reported that 63% of card fraud involved cross-border transactions in 2021, affecting each business’ chargeback rate.
This can be hard to overcome but communicating clearly with customers about exchange rates goes a long way, including offering multi-currency pricing. Of course, it can be difficult to handle the biggest challenges in high-risk payment processing, but facing them can help reduce overall chargeback rates by industry.
Cross-Border Transactions: A Dispute Conundrum
Within this subject, we can also highlight cross-border transactions. Thanks to the Internet, the world has become much smaller, and it’s possible to purchase goods and services from countries extremely far away. However, this also includes multi-currency issues and a higher risk of fraud. In fact, a report by the European Central Bank reported that 63% of card fraud involved cross-border transactions in 2021, affecting each business’ chargeback rate.
This can be hard to overcome but communicating clearly with customers about exchange rates goes a long way, including offering multi-currency pricing. Of course, it can be difficult to handle the biggest challenges in high-risk payment processing, but facing them can help reduce overall chargeback rates by industry.
The Role of Payment Methods in Dispute Statistics
These days, there are many different ways for customers to pay for goods and services, from traditional routes, such as credit and debit cards, to modern options, such as digital wallets and even cryptocurrencies. However, payment types also affect dispute rates and chargeback statistics. Let’s explore this briefly.
Reports have shown that credit card transactions are more likely to cause a dispute, compared to debit cards. In fact, credit cards had a chargeback ratio of 7.19%, compared to 5.93% for debit cards. However, digital wallets, one of the most modern types of payment methods, have a 99.6% lower chargeback volume than traditional transaction types, according to WorldPay research.
Much of this is thought to be due to the advanced security features associated with digital wallets, such as biometric authentication and tokenization, boosting security and reducing chargeback likelihood. It’s important to consider these elements when choosing payment types and payment gateways.
Learnings Recap
Throughout this guide, we’ve talked about some of the most fascinating and shocking chargeback statistics. By this point, it’s clear that high-risk businesses in particular deal with a number of challenges that could, in the worst case scenarios, become a threat to their existence.
There are many factors at play here; from seasonal trends to economic factors, technology to general customer preferences that change over time, chargebacks and disputes can and do happen quite frequently, creating the need for a solid and robust prevention plan. The good news is that there are many emerging technologies that have the potential to revolutionize dispute prevention. This includes AI, blockchain, and biometrics. All have demonstrated effectiveness and as they evolve, could help high-risk businesses win the battle against low chargeback win rates.
Having explored the question of how often merchants win chargeback disputes, it’s clear that more needs to be done. That’s where PayCompass comes in. We offer specialized high-risk merchant accounts to suit your specific needs. We understand what you face on a daily basis and we’ve tailored our services to help you overcome regular challenges. Our accounts all feature built-in chargeback prevention, while we offer real-time transaction monitoring to help you spot any potential fraud before it results in a dispute.
So, if you’re ready to win the battle against chargebacks, reach out to us today.
