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5 things merchants need to know about customer chargebacks
Read time: 3 mins Added: 11/07/25
According to Mastercard, the volume of global chargebacks will increase by 41% between 2023 and 2026, from 238 million to 337 million.1 Chargebacks can be a tricky issue for businesses, impacting revenue and customer relationships. With cases expected to rise, it's key to know how to protect your business. Our must-know tips could help keep you ahead of the game.
What are chargebacks?
Think of chargebacks as a safety net for customers. When a customer disputes a debit or credit card purchase, they tell their card provider, who steps in to reverse the payment. The disputed amount is taken back from the merchant’s account, until it’s decided if the chargeback request is valid. The merchant is asked for any evidence that explains why the customer shouldn’t get their money back.
It's important to respond quickly. Responding swiftly and providing solid evidence could help turn things in your favour.
Refunds and chargebacks are not the same
Chargebacks are different from refunds. With refunds, the customer deals directly with the merchant, who’s responsible for returning the payment if they agree with the dispute.
Typically, customers might try to get a refund first and, if denied, they’d contact their bank for a chargeback.
6 reasons why customers request chargebacks
Customers dispute transactions for all sorts of reasons, including:
- Fraudulent transactions: Someone used the customer's card without permission.
- Friendly fraud: These disputes come from customer misunderstandings, buyer’s remorse, or the customer intentionally abusing the chargeback process. It’s the second most common type of fraud attack merchants have to deal with.2
- Product not received: The customer didn't get what they paid for. Or, it could be that delivery details were vague and the item didn’t arrive when the customer expected.
- Duplicate charges: The customer was charged more than once for the same thing, or is still being charged for a cancelled subscription.
- Poor customer service: If the customer can’t get hold of someone to ask for a refund - or they don’t get a timely reply when they do – they may lose patience and request a chargeback instead.
- Unrecognised transactions: If you trade under a different name to your business name, the customer may think they’ve been a victim of fraud when they see the transaction in their statement.
You can’t prevent all these things, but understanding why chargebacks happen can help you spot potential problem areas. Below, we’ve listed 5 key changes businesses can make, to help prevent disputes or to stop them from escalating.
It’s not only about finances – it’s about brand trust and reputation too
Chargebacks can be costly, not only if you lose the transaction amount, but also because of the fees involved. And if chargebacks regularly feed into customer reviews, trust in your brand or business could be affected.
High volumes of chargebacks could hurt your reputation with payment processors too, leading to higher fees or limited access to products.
5 ways businesses can help reduce disputes
You know your business best, and by listening to customer feedback, you can identify areas for improvement. Positive customer journeys and strong processes can help you limit requests for chargebacks in the areas you have control over.
Here are some steps you can take:
- Clear communication: Make sure all transaction and delivery details are crystal clear to your customers.
- Robust fraud prevention: Use advanced tools to catch and prevent unauthorised transactions.
- Effective customer service: Address complaints quickly and offer solutions before they escalate.
- Accurate record-keeping: Keep detailed records of all transactions and communications. Keeping an eye out for chargeback requests on your online reporting tool will help you act fast and could save you money.
- Use the same business and trading name: This can be easily done by contacting your payment processor, and could prevent suspected fraud chargeback requests.
Taking these steps can help businesses reduce the number of chargeback requests, or minimise their impact.
What to do when a chargeback happens?
When a chargeback is requested, the customer's bank will notify the merchant's bank. This is your chance to provide evidence which is why good record-keeping is a must.
Respond promptly with evidence like transaction receipts, delivery confirmations, and any communication with the customer. A well-documented response could help resolve the issue in your favour.
As you can see, there’s a lot you can put in place to stay one step ahead of chargebacks. If you need any more advice or support, Lloyds leading customer support teams are here to help. Or take a look at our chargebacks enquiries page.
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Learn more about:
1 Eaton, M – Chargeback Stats: All the Key Dispute Data Points for 2025.
2 Cybersource, 2024 Global Fraud Report.