In-App Purchase ChargebacksThe Developer’s Guide to Preventing IAP Chargebacks

September 14, 2023 | 10 min read

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in-app purchase chargebacks

In a Nutshell

If your software application or development company suffers from frequent chargebacks, it’s time to learn what’s putting your business at risk. This article will explain everything you need to know about in-app purchase chargebacks, including how they happen, their repercussions, and strategies for preventing them altogether.

10 Tips to Prevent In-App Purchase Chargebacks

Chargebacks, or forced payment reversals resulting from a customer dispute, are becoming an epidemic within the software and development sector.

Part of the problem is the overall upward trend in chargeback issuances across the board. On the other hand, key aspects of the electronics industry make it particularly susceptible to disputes. High-purchases, billing errors, and ease of access are all factors. This can create substantial challenges for app developers.

So, how do in-app purchase (IAP) chargebacks work? How can merchants prevent them? Let’s take a look.

In-App Purchase Chargebacks: At a Glance

An in-app purchase chargeback, or IAP chargeback, is the reversal of a payment made through a software application. The customer usually initiates the dispute through the bank that issued the card.

This action is typically taken in response to an issue reported by the cardholder. Receiving a defective product, unauthorized transactions, or other dissatisfaction with the purchase can all trigger chargebacks.

When a customer initiates a chargeback for an in-app purchase, the customer’s issuing bank investigates the claim to determine its validity.

Suppose the issuing bank finds the claim valid. In that case, they will file an in-app purchase chargeback against the merchant’s acquiring bank. They’re essentially reversing the transaction, refunding the customer, and debiting the seller's account. In this case, the merchant will be charged a fee, regardless of whether or not the chargeback is warranted

Why Do In-App Chargebacks Happen?

We’re in an age where online shopping dominates and shapes customer expectations. Against that backdrop, chargebacks are a stark reminder of the importance of product quality, customer service, and overall transparency. App developers must recognize these potential pitfalls and work proactively to mitigate them. 

On that note, here are some common reasons customers file for in-app purchase chargebacks:

Defective Products

If the item purchase is defective or buggy, buyers would naturally feel entitled to a refund. If the company fails to resolve the issue promptly, the customer may resort to a chargeback.

Product Not As Described

Customers may feel misled if the product received significantly differs from the description or screenshots online. For instance, incorrect specifications, utility, or in-app navigation.


Failure to deliver a purchased item to the customer’s account within the promised timeframe can lead to a chargeback.

Unauthorized or Fraudulent Transactions

Let’s say a customer notices an unauthorized transaction on their account related to one (or several) in-app purchases. If this happens, they may file a chargeback to reverse the fraudulent charge.

Billing Errors

Incorrect billing, such as being charged twice for the same item or being charged an incorrect amount, can lead to a chargeback if the company does not quickly rectify the mistake. This is especially true when dealing subscriptions for in-app purchases. 

Unsatisfactory Customer Service

Poor customer service, including unresponsiveness, rude behavior, or failure to assist with returns or refunds. Any of these, even if it’s just a subjective perception, may lead a customer to seek recourse through an in-app purchase chargeback.

Subscriptions & Recurring Charges

Some companies offer subscription services for software or hardware support. If the cancellation process is cumbersome or unclear, and charges continue after customers believe they have canceled, they may file a chargeback to recover the funds.

Issues With a Return

If a company has a complex or restrictive return policy, customers might struggle to get refunds for unwanted or unsatisfactory items. Frustration with this process may lead to a chargeback as a last resort.

Lack of Transparency

Hidden fees, unclear terms and conditions, or undisclosed commitments can lead to unexpected charges on a customer's statement.

Did you know that digital goods are some of the most at-risk products when it comes to chargebacks?REQUEST A DEMO

How Do Chargebacks Impact the Software and Development Industry?

The more disputes that are filed, the more risky the brand appears. That leads to higher processing fees, stricter operating limitations, and more. There’s a ripple effect as well; in-app purchase chargebacks hurt the software industry as a whole. 

Chargebacks can lead to:

Reputational Damage

Chargebacks can make one’s brand appear less trustworthy. Each chargeback signifies a customer's dissatisfaction or dispute, which can tarnish the company’s image in the eyes of potential customers and financial institutions. A high number of chargebacks can create the perception that they’re failing to deliver satisfactory services or honor commitments.

Increased Risk Scrutiny

Frequent chargebacks may attract heightened scrutiny from payment processors, financial institutions, and regulatory bodies. A company might be subject to additional risk assessments and monitoring, leading to stricter regulations, higher processing fees, or even terminating partnerships with payment processors. This heightened scrutiny can increase operational complexities and costs.

Customer Churn

Chargebacks can contribute to customer attrition or churn. Dissatisfied customers who file chargebacks are more likely to cancel services or seek other options. The loss of loyal customers impacts revenue and erodes customer retention rates, making it more challenging to maintain a stable customer base.

Operational Disruptions

Handling in-app chargebacks means diverting resources and manpower from core business operations. The company must invest time and effort into investigating, documenting, and responding to chargeback claims. That means diverting resources from other crucial operations like customer service, fulfillment of services, or product development.

Compliance Challenges

As mentioned above, chargebacks can pose compliance challenges. A company must adhere to regulatory requirements and industry standards when addressing their reputation.

Learn more about chargeback costs

In-app purchase chargebacks hurt everyone involved in the process, sometimes even the customers who file them. This is why it’s so important for app developers to keep ahead of the curve by implementing a few best practices to limit overall industry exposure. 

10 Tips to Prevent In-App Purchase Chargebacks

Software and app developers must proactively address chargeback issues. The keys to this are improved communication, enhanced customer satisfaction measures, and effective dispute resolution when necessary.

Developers need to embrace a customer-centric approach focused on transparency and satisfaction. This proactive approach fosters trust, prevents misunderstandings, and ensures customers make informed purchase decisions.

To that end, we recommend these 10 best practices to decrease overall chargeback issuances:

#1 Communicate Clearly

Ensure that all terms, requirements, and other crucial information are clearly communicated to customers. Using plain language and avoiding industry jargon that may confuse or mislead customers is crucial. Providing comprehensive documentation and offering opportunities for customers to ask questions can enhance their understanding and reduce the likelihood of chargebacks resulting from a misunderstanding.

#2 Educate Customers

Educating customers is essential. Merchants should offer resources like user-friendly guides, online portals, dedicated customer support, etc., to help customers. Regular communication, reminders, and updates about any changes to service or upcoming renewal dates can also minimize confusion and prevent disputes.

#3 Clarify Billing Practices

Accurate billing practices are critical to prevent billing disputes and chargebacks. Merchants should ensure that invoices and statements are error-free, clearly indicating the services provided, associated costs, and any adjustments or refunds. Billing transparency and easy-to-understand itemization can help customers recognize and validate charges, reducing the chances of in-app chargebacks.

#4 Provide Training

Conducting comprehensive training for representatives who engage with customers is crucial. This training should emphasize accurate representation of terms and ensure that sales agents thoroughly understand the products and can effectively communicate them to potential customers.

#5 Prioritize Customers

Maintaining strong customer service is vital for addressing customer concerns and resolving issues promptly. By offering accessible communication channels, such as phone, email, or live chat, one can proactively assist customers, clarify uncertainties, and address complaints before they escalate to chargebacks. Timely and empathetic customer support can go a long way in preventing disputes.

#6 Ensure Compliance

Staying up-to-date with industry regulations and adhering to best practices for data security and privacy can minimize potential compliance issues. Complying with regulatory requirements can reduce the risk of penalties, legal disputes, and subsequent chargebacks.

#7 Automate Reminders

Using automated payment reminders can help customers stay informed about upcoming due dates and avoid missed payments. Sending timely notifications through email, text messages, or mobile apps can prevent accidental lapses in service.

#8 Improve Documentation

Merchants should ensure that any policy documentation is comprehensive, easily accessible, and written in customer-friendly language. Clear and detailed terms, service limitations, exclusions, and procedures can minimize misunderstandings and disputes.

#9 Enhance Verification

Implementing thorough verification processes during a transaction can help confirm customers’ identities, intentions, and understanding of the service. This can include additional authentication measures or validation checks to mitigate instances of fraudulent or unauthorized transactions.

#10 Seek Feedback 

Regularly seeking customer feedback through surveys, satisfaction ratings, or online reviews can provide valuable insights into which improvement may be necessary. Addressing customer concerns promptly can help prevent frustrations from escalating into in-app chargebacks and demonstrate a commitment to customer satisfaction.

Learn more about chargeback prevention

Chargebacks Require a Better Solution

Combining the best practices outlined above can help your company create a solid framework to minimize in-app purchase chargebacks. You can also enhance customer satisfaction and ensure a smooth and secure experience for customers in the process.

All that said, a piecemeal strategy won’t be effective. True fraud prevention and risk mitigation require a more comprehensive approach. Fortunately, we can help.

Chargebacks911® offers a true end-to-end technology platform that prevents more disputes, wins more reversals, and maximizes your ROI. Contact us today for more information on improving customer service to prevent chargebacks.


Will Apple refund in-app purchases made by a child?

Apple generally offers refunds for in-app purchases made by a child without parental consent, provided the issue is reported in a timely manner. Parents can request a refund by going to their Apple ID account page, reviewing the purchase history, reporting the unauthorized purchase, or contacting Apple Support directly. However, it's essential to act quickly, as delays in reporting could affect eligibility for a refund.

Can I get a refund for unauthorized purchases made by my child?

App sellers typically refunds in-app purchases if a child made them without the approval of a parent or guardian. To request a refund through Apple, for instance, parents can either navigate to their Apple ID account page to find the transaction and report the issue or directly reach out to Apple Support. Prompt reporting is crucial, as waiting too long may limit refund options.

What happens if a buyer does a chargeback?

If a buyer initiates a chargeback for an App Store purchase, their bank or credit card provider contacts the payment processor, which in turn informs Apple. If the financial institution approves the chargeback, the funds are returned to the buyer, and the app developer may incur additional fees. Excessive chargebacks can lead to higher transaction costs for the developer and could even risk the app's standing in the App Store.

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