Chargebacks: What are they? And how can you make them stop?

A refund is issued by the business at the customer's request. A chargeback is initiated by the cardholder through their bank, which reverses the payment and notifies the business after the fact. With a refund, the business retains control of the process and avoids the fees and dispute overhead that come with a formal chargeback. With a chargeback, the bank decides the outcome and the business pays a fee regardless of whether the dispute is upheld.

A chargeback dispute, sometimes called representment, is when a business contests a chargeback by submitting evidence to the issuing bank. If the evidence is compelling, the bank may reverse the chargeback and return the funds. Businesses have a limited window to respond, which varies by card scheme and reason code. Missing that window means forfeiting the right to challenge the chargeback entirely.

A compliance chargeback is filed when one party in the dispute process believes the other has violated card scheme rules. These typically arise after a standard chargeback dispute has already been resolved and are relatively rare, but they can be costly and are handled directly by the card scheme rather than the issuing bank.

A fraudulent chargeback, also known as friendly fraud, is when a cardholder disputes a legitimate transaction. This could be intentional, for example filing a dispute to get goods for free, or unintentional, for example not recognizing a charge on their statement. Unlike true fraud, where the cardholder is a genuine victim of an unauthorized transaction, friendly fraud involves a transaction the cardholder authorised themselves.

A chargeback guarantee is when a fraud or payments provider underwrites your chargebacks, taking on the financial risk in exchange for managing your disputes. While this offers predictability, it comes with a trade-off: providers who are financially liable for your chargebacks have a strong incentive to be conservative, which can mean tighter risk thresholds, more blocked transactions, and more legitimate customers turned away. Before committing to a chargeback guarantee, it's worth asking whether you're buying predictability at the cost of revenue and customer experience.

Adyen approaches chargeback prevention as part of a broader payments strategy rather than a standalone dispute management problem. Because Adyen operates across the full payment stack, from authentication through to settlement, it can identify high-risk transactions before they become disputes, automatically shift liability on fraud-related chargebacks through 3D Secure, and connect signals across channels and markets that siloed tools would miss. A Forrester Total Economic Impact study found that businesses using Adyen reduced chargebacks by 27%, worth $2.5 million over three years, without compromising conversion.