Chargeback Fraud Definition & Impact on Go-to-Market Teams | CHEQ


Chargeback Fraud

Prevent fake traffic from using your site to commit chargeback fraud and protect your revenues and credit reputation

What is chargeback fraud and how does it operate?

Chargeback fraud occurs when customers fraudulently initiate refund disputes through their banks and credit cards for legitimate purchases, rather than requesting refunds from the merchants. Companies also experience chargeback fraud when victims of stolen credit cards are refunded for illegitimate purchases.

The burden of proving the payment’s legitimacy falls to merchants, who must absorb the costs of the refunds and fees and spend resources fighting the chargebacks. Chargeback fraud costs companies money, damages their reputation with credit card processors, and drags down their merchant history.

Common use cases

Fraudulent Transactions

Bots buy gift cards or other items for resale with stolen credit card data and dispute them, stealing the refund

Friendly Fraud

Customers do not remember or recognize the charge on their statement and open a dispute, costing the merchant

Legitimate Disputes

Customers experience issues with the merchant and open a dispute instead of dealing directly with them

(Not so)

Fun Fact

$240 is the true cost of every $100 in chargebacks after accounting for wasted time, fees, penalties, customer acquisition costs, and lost opportunity cost, with additional intangible damages to reputation.

What are the threats to
the Go-to-Market Operation?

  • Companies experiencing chargeback fraud can suffer heavy financial losses through loss of product, wasted time, bank fees, penalties, customer acqusition costs, and lost opportunity cost.
  • Bots and fake users attacking your payment processing may strain the system, causing latency and frustration for real customers, potentially increasing rates of cart abandonment.
  • Chargebacks can affect your relationship with your payment processor by damaging your reputation, resulting in higher transaction fees, more frequently blocked transactions, and stricter authentication methods.


Secure your site from chargeback fraud

CHEQ provides a layer of visibility over all bots and fake users coming to your site, allowing you to manage, mitigate, and block malicious actors looking to cause harm or commit fraud.

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