Calculate Chargeback Win RateComparing Your Chargeback Win Rate vs. Net Recovery Rate
How to Calculate Your Chargeback Win Rate
Your dispute win rate helps you determine if your current approach to chargeback and fraud management is effective, or if there are weaknesses that need to be addressed. But, how exactly do you calculate that number?
The answer is that your chargeback win rate is the ratio of chargebacks you “win” to the total number of chargeback responses you submit. If we dig a little deeper, though, there’s more nuance to the question, along with other related indicators to examine.
Chargeback Win Rate
Chargeback-to-transaction ratios can help you determine how well you prevent chargebacks, but what about the chargebacks you can’t avoid? This article will explain everything you need to know about your chargeback win rate: why it matters, how it’s calculated, and what you can do to improve your numbers.
Formulas to Calculate Your Win Rate & New Recovery Rate
There are differing levels of granularity here. You can segment your chargeback win rate based on factors like product category, for instance, to compare representment success in different verticals. In all cases, though, your chargeback win rate can be calculated using this simple equation:
And, as we discussed in an earlier chapter, your net recovery rate is the ratio of chargebacks you won as a portion of total chargebacks filed by customers.
Seems simple enough, right? Well, there’s a little bit of nuance as to what counts as a “won” chargeback, which we should also probably touch on.
What Counts as a “Won” Chargeback?
You can say you “won” a chargeback if the bank accepts your re-presented transaction, or if the cardholder withdraws their claim before a judgement is made.
Understanding what qualifies as a chargeback “win” is crucial for accurately calculating your win rate and measuring your dispute strategy's effectiveness.
You can say you “won” a chargeback if you submit compelling evidence and the issuing bank rules in your favor, overturning the chargeback entirely. It also counts if a cardholder withdraws their disputes after you provide evidence, but before a formal judgment is made. This counts as a win since you successfully defended the transaction.
Issuer-declined disputes — any claims rejected by the issuing bank before they even reach you for representment — shouldn’t be counted, as you didn't actively fight these claims. The same applies to any disputes that you accept without representment. Disputes you choose to accept as valid losses shouldn't be included in win rate calculations. Instead, they should be tracked separately as “accepted losses.”
Do Second Chargebacks Count Against Your Chargeback Win Rate?
The simple answer is “no,” second chargebacks don’t count against your win rate.
What am I talking about? Well, what if you lose the initial representment, but you choose not to proceed to arbitration? Or, the issuer escalates to the arbitration stage, and you end up losing?
These are clear losses. But, the silver lining here is that losing an arbitration case will not count as an additional loss against your chargeback win rate. The initial chargeback has already been counted against your chargeback ratio. You’re not going to get double-tapped by having that dispute counted twice.
Win-Rate Measurement Strategy
Depending on your business type, fraud solution, and other data related factors, the best way to measure your win rate varies.
Track your win rate based on count of representments vs. wins if:
- Your business has a consistent transaction value that doesn't vary much
- You have solid fraud tools in place with a manual review process, and
- You generally have the same information available on every type of chargeback.
Track your win rate based on the value of representments vs. won revenue if:
- Your business varies in transaction values, and
- All other factors are the same.
When looking at choosing a vendor, make sure you pay attention to the percentage of chargebacks they are representing. We call this measurement the Exception Rate. This is calculated using the same method above, only looking at the number of cases you did not represent out of the total chargebacks you received.
Unlike revenue related recoveries, the higher this number, the worse off you are....percentages over 20% could mean you have a major issue with your fraud filter, your data sources, or your vendor.
Bottom line, when looking at measuring your win rate, make sure you check your exception rate as well! You might be celebrating an 80% win rate, but if your exception rate is 50%, this means out of 200 chargebacks, you are really only defending 100. Whether you operate a team in house or use a third party, it's best to measure twice.
