The Chargeback FlywheelChargebacks are a Multi-Faceted Problem. You Have to Address Them as Such.

May 8, 2023 | 11 min read

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A giant flywheel with arrows moving forward and being propelled by business people – like a flywheel on a rowing machine. Realism, muted colors with pops of red and teal.

Chargeback Flywheel

In a Nutshell

Most chargeback problems are too complex for a “one-size-fits-all” solution. That doesn’t mean it’s hopeless, though; you just need the right strategy. In this post, we’ll introduce you to the “chargeback flywheel” to help you understand how all the elements of chargeback management come together to form an effective strategy.

The Chargeback Flywheel: A New Way of Looking at Why Chargebacks Happen & What to Do About Them

There’s a lot of fear these days about identity theft and criminal fraud. And sure: popular media and other parties that stand to benefit might be inclined to play up those fears to their advantage in some cases. That doesn’t make the threats any less real, though.

A lot of the focus is on protecting consumers. However, focusing solely on consumers can overshadow the fact that banks, processors, and card networks can also be victims. Fraud can result in reputational damage, monetary losses, and other consequences for businesses.

In the end, merchants have to pick up the tab for fraud and payment abuse. When cardholders call their bank and claim a charge is fraudulent, the bank can file a chargeback against the merchant. 

Managing this threat requires a holistic approach that covers every aspect of the chargeback lifecycle. Before you do that, however, you have to understand what you’re really up against.

Dispute Sources: Where Are My Chargebacks Coming From?

You might be surprised to learn that third-party (or “criminal”) fraud actually makes up a small portion of overall chargeback issuances. Data from Visa shows that three-quarters of chargebacks can be traced to errors, miscommunication, or deliberate misuse of the chargeback process. In fact, non-criminal chargebacks are expected to cost merchants more than $100 billion in 2023 alone.

To illustrate, let’s say a customer doesn't recognize a charge on their monthly statement, and consequently calls their bank to inquire about the charge.

Maybe the cardholder forgot the purchase, or simply doesn’t recognize the billing descriptor. Maybe they were just calling for a little more information, and the bank agent misunderstood. In either case, the charge was legitimate, but the bank ends up filing a chargeback against the merchant because of a misunderstanding. It’s an innocent mistake, but it still leads to an invalid chargeback either way.

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Then, of course, there’s a small minority of cardholders that are actively trying to scam the system. They may claim an item was broken, or never arrived, when neither statement is true. They report that the merchant refused to issue a refund, when in fact the merchant didn’t even know there was a problem. It’s cyber shoplifting: attempting to get something for free.

The point is, there are multiple ways invalid chargebacks could occur… and that’s the heart of the problem. Businesses want to avoid chargebacks, but prevention and management isn’t a simple procedural issue, because there’s no single chargeback source. Instead, all disputes fall somewhere within the “chargeback spectrum”:


Let’s be clear: merchants who shore up their defenses against bogus chargebacks aren’t trying to “punish” consumers, or impinge on their right to file valid disputes. In fact, by filtering out the large number of fraudulent claims, customers with legitimate claims can get issues resolved faster and more easily.

The Basics of Chargeback Management

For the most part, effective chargeback management comes down to three key elements: protection, response, and intelligence. These elements are part of a greater chargeback management flywheel:


The goal here is obvious: to proactively safeguard your business against chargebacks. One tool for accomplishing this is a fraud filter, which can help weed out some suspicious transactions before they are authorized.

Filters must be used carefully, however, as they generally make decisions based on merchant-set parameters. In attempting to catch all fraud before it happens, merchants commonly set parameters so high that a lot of legitimate orders get turned away. For many merchants, revenue lost due to false declines ends up being more than they would have lost to fraud.

There’s a balance that must be struck here. However, that inherently means some bogus orders will get through, likely leading to chargebacks. That’s where the next stage comes into play.


If you’re a merchant, there are three possible responses to a customer dispute. One is accepting it and writing off the costs of the chargeback as an unavoidable business expense.

A better method is trying to stop the dispute from escalating to an actual chargeback, typically by refunding the customer. While stopping the chargeback will cause less damage than accepting it, there are still substantial losses to the merchant.

In cases of clear first-party misuse, the best option is to challenge the chargeback after the fact. Representment will let you recover revenue that would otherwise be lost. It also sends a message to banks, customers, and scammers: you will fight back against illegitimate chargebacks.

Common QuestionIs it possible to fight too many chargebacks?You never want to fight a chargeback when a cardholder has a valid claim to make. Regarding genuine first-party chargeback misuse, though, the answer is “no,” for the most part. As we’ve seen, there’s little to be gained by just accepting invalid disputes. If your business is getting that many chargebacks, however, you’re better off fighting them at the source.


Chargeback intelligence is an area that is often overlooked. However, it’s key to effective dispute management.

Merchants who can’t learn from past experience — both mistakes and successes — are sure to see the same types of chargebacks issued, over and over. There’s plenty of information that can be gleaned from evaluating claims and challenges, and this data can all be analyzed to help improve decisioning on future cases.

As you can see, eliminating any one of the three elements will leave gaping holes that will allow chargebacks to get through your defenses. It will also cause a ripple effect that renders your other efforts less effective.

Overlapping Methods for Better Protection

Unfortunately, there is no silver bullet for managing chargebacks. Just as there are multiple stages to the “chargeback flywheel,” there are also different tactics for keeping things under control.

As we see by this illustration, there’s not a one-to-one correlation between dispute management elements and the strategy techniques. No single one of these approaches can effectively stand alone; they work together to form a cohesive machine.

For example, let’s go back and look at the Intelligence stage of the chargeback flywheel. The idea here is to identify fraud wherever you can, so the more accurate information you have, the better. That means leveraging every scrap of data you have at your disposal, and incorporating them all into your fraud detection efforts. 

In gathering and analyzing your situation, you will come across at least a few seemingly harmless errors and missteps in your policies or procedures. You can use information gathered to eliminate these errors and, ultimately, to decrease chargeback issuances. So, you can see how both identifying and lowering fraud instances leverage the intelligence step of the flywheel.

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Taking steps to decrease errors will also help prevent disputes, which moves us into the Protection stage. Resolving internal errors is one of the fastest and easiest ways for a business to lower chargeback incidents. 

The other goal of the Protection stage is to prevent disputes. Pre-transaction, this typically means applying fraud filters. Post-transaction, the use of chargeback alerts or automated information programs (such as Visa Order Insight) can stop disputes in many cases before they can escalate to full-scale chargebacks. 

Note that using these solutions requires a response on the part of the merchant, taking us into the Response category. While pre-chargeback responses stop chargebacks from happening, post-chargeback responses (rebuttals) help recover funds lost to invalid claims. Working together, these tactics give merchants a powerful way to increase revenue.

We’ve now come full-circle on our chart, but the cycle continues as a positive feedback loop. In the Response process, you can identify fraud by leveraging information that is uncovered through merchant responses, further refining the Intelligence stage.

Don’t Worry: Help is Here

Implementing all of these tactics can have a huge impact on fraud and chargeback management. How do you get started, though?

Chargebacks911® offers a single, end-to-end technology platform that links all the aspects of the flywheel together, engaging a tools and tactics for optimal results.

Chargebacks911 starts with the richest, deepest collection of dispute information available, gathered from merchants of all sizes and across all verticals. This wealth of knowledge enables better decision making for our clients, and has led to the creation of proprietary tools unavailable anywhere else.

Intelligent Source Detection

The true reason behind a transaction dispute isn’t found in the reason code; it comes from detailed analysis, dynamic strategies, and innovative technologies. That’s why Chargebacks911® created Intelligent Source Detection, a proprietary blend of patent-pending technologies and expert human analysis designed to find the real source of every chargeback.

Tactical Chargeback Representment

With every undisputed chargeback, your business is leaving money on the table. That revenue loss is completely unnecessary, however: Chargebacks911 has optimized the revenue recovery strategy. Our Tactical Chargeback Representment product is known as the gold standard throughout the industry: not only do we win more cases, we actually identify more dispute opportunities!

Merchant Compliance Review

Compliance is key to any long-term chargeback management solution. The typical merchant assumes that chargebacks are just a cost of doing business, but we’ve proven that chargebacks can be reduced or even prevented… if you have the right tools. Our Merchant Compliance Review & ERT (Error, Risk & Threat) Notifications will help you identify and correct the errors that can lead to transaction disputes.

Chargeback Alerts

Chargeback alerts are a dispute prevention product provided by a chargeback management specialist. Alerts providers work closely with banks to ensure that you receive advance notice of impending chargebacks. This lets the you resolve the issue before a chargeback happens.

Did You Know?

The two main providers of alerts — Ethoca and Verifi — each have their own network of issuers. Signing up with either network will expand your protection. However, Chargebacks911 offers the widest coverage available by combining both providers' products with our own exclusive network for comprehensive protection.

Order Insight & Rapid Dispute Resolution

Chargebacks911 are facilitators for automated information systems such as Order Insight and Rapid Dispute Resolution. Order Insight lets you respond to customer inquiries with additional transaction information in real time. Rapid Dispute Resolution, in contrast, will automatically accept and resolve disputes based on your preset parameters. Both tools are available and can be implemented through the Cb911 platform.

All this information is available with intuitive reporting that can be customized to your needs. While the system captures reams of data from each dispute, your reports can be set to show only the data you want, in an easy-to-understand, user-friendly format.

And of course, all the information we gather is added to our data banks. Through the use of AI and machine learning, our expert analytics perpetually fine-tune our processes and increase our intelligence, completing the solution circle.

When you look at the whole picture, it’s easy to see how all the moving pieces of chargeback management intermesh and overlap. That’s why your best bet is a seamless, integrated platform with tools that can adapt to needs.

To learn more, talk to the experts at Chargebacks911® about a free chargeback analysis today.

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