The Year in Chargebacks


Midigator’s The Year in Chargebacks report takes an in-depth look at payment disputes. The data provides unprecedented insight into why chargebacks happen, how to prevent and fight chargebacks more effectively, and what’s in store for the future.

At Midigator, we believe data analysis is one of the most impactful elements of a successful chargeback management strategy. Data-driven decisions produce far better results than guesses and assumptions. The Year in Chargebacks report is designed to help you recognize the value of data analysis and the role it can play in chargeback management.

Ultimately, we want to help you create intelligent, effective strategies that will lead to a significant improvement to your bottom line.

We hope this resource is valuable to you!

The Year in Chargebacks is an annual publication. Click here to view the 2020 report or here to view the 2019 report.

The data in this study was collected from a subset of merchants who used Midigator to fight chargebacks for 12 consecutive months. These merchants were chosen because they represented a broad spectrum of billing models, industries, transaction volumes, and dispute management styles.

Merchants in this study ranged from small startup businesses to large enterprise brands. In 2020, individual chargeback counts ranged from 15 disputes a year to 84,431. Annual sales ranged from $73,000 to $235,000,000.

The 2020 data was generated from 52 million transactions and $2.1 billion in total transaction volume.

Midigator’s The Year in Chargebacks report is the first of its kind because it is data-driven analysis. All other industry reports that contain chargeback information are based on merchant surveys.

Data provides a more accurate explanation because it is factual, whereas surveys reflect opinions and assumptions. Therefore, The Year in Chargebacks report provides a truer representation of current chargeback trends.

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Report Overview

What are the most important conclusions that can be drawn from The Year in Chargebacks?


Why does The Year in Chargebacks report show a decrease in year-over-year trends when other studies indicate chargeback risks are intensifying?

The difference is an ongoing effort to manage disputes.

Chargebacks are still a significant threat as this report’s 1.94% chargeback-to-transaction ratio indicates. If merchants didn’t make any effort at all to reduce risk, the data in The Year in Chargebacks would be much different.

However, the merchants in this study recognize the dangers that chargebacks pose to their business and have focused on reducing them.

Therefore, the drop in the chargeback-to-transaction ratio emphasizes the effectiveness and value of Midigator’s ongoing, proactive chargeback management efforts.


Merchants are encouraged to follow a comprehensive chargeback prevention strategy to reduce unnecessary revenue loss, costs, and penalties. 

This should include a combination of pre-sale strategies (address verification service, card security codes, third-party vendors), post-sale tools (prevention alerts, Consumer Clarity, Order Insight), and post-chargeback management initiatives.

Fighting chargebacks can be a difficult task. And because it isn’t always easy, a lot of merchants don’t even try to recover lost revenue. However, that can be a costly mistake.

In 2020, merchants who fought chargebacks experienced an average return on investment (ROI) of 595%. When broken down by industry averages, revenue recovery ranged from $6,577 to $416,116 per merchant with individuals recovering as much as $2.7 million. Labor savings averaged between 61 and 20,973 hours per merchant with merchants saving as much as 44,524 hours — which is the equivalent of 21 full-time employees.

Ultimately, with the right evidence and the right response strategy, it pays to fight.


Merchants should create a strategy for fighting chargebacks that includes collecting necessary compelling evidence, setting fight rules to optimize ROI, customizing responses, and meeting submission deadlines. Technology can help ensure the highest win rates possible with the least amount of expenses.

The COVID-19 pandemic had a significant impact on nearly all businesses in all industries in all regions of the world. Everything from inventory and shipping to customer service and refunds was affected.

And for some merchants, chargeback management strategies were altered too. For example, common struggles included an influx in disputes, an inability to fight chargebacks before they expired, a lack of transparency regarding outcomes, and much more. 

However, these challenges only affected certain merchants — primarily those who managed chargebacks internally or used one of Midigator’s competitors.

Because the merchants included in this study had benefited from Midigator’s advanced technology and expert advice — some for more than five years — the results in The Year in Chargebacks were markedly different from what was reported throughout the industry. 

For example, Midigator’s team of experts anticipated a potential increase in fraud activity and helped merchants obtain the tools they needed to reduce risk — the use of identity verification tools increased 43% between 2019 and 2020. This, combined with a significant increase in transaction volume, helped ensure the study’s downward trend in the chargeback-to-transaction ratio continued in 2020. 

Moreover, because of Midigator’s automation and streamlined workflows, merchants were able to keep chargeback management a top priority in 2020. While other merchants struggled to meet deadlines due to an increase in chargeback volume and manual processes, the merchants in The Year in Chargebacks continued to fight a significant portion of disputes — more than 78% were fought — year-over-year.

Positive chargeback management outcomes can’t negate the devastation that merchants faced. However, these small victories were a welcome relief for many during such a tumultuous time.


Merchants can use this unprecedented experience as an opportunity to reconsider their opinions about chargeback management. 

For those who haven’t already accepted professional chargeback management help, now is the time. Proactively seeking assistance before chargebacks become a liability is key. Merchants can use technology, like Midigator, to remove the complexities of payment disputes so they can focus on what matters most: growing their business.

Percent of Transactions that Turn Into Chargebacks

Is there an accurate metric to gauge the impact of chargebacks? What is the best way to monitor trends?

The most relevant and accurate insight comes from multi-dimensional analysis. It reduces the risk of assumptions drawn on incomplete data that can often happen without context. Therefore, one of the most helpful chargeback management metrics is the chargeback-to-transaction ratio — the percent of transactions that turn into chargebacks. 

The study’s overall chargeback-to-transaction ratio dropped by 25.1% between 2019 and 2020. In total, the ratio has dropped 48.4% since 2017.


The decrease in the overall chargeback-to-transaction ratio was driven by significant declines for Visa® and Mastercard®.


It’s often difficult to detect noteworthy trends for American Express® and Discover®. One reason is because these card brands process significantly fewer transactions than Mastercard and Visa — American Express transactions accounted for 2.78% of the study’s total transaction volume and Discover a mere 1.67%. 

Another reason is because American Express and Discover often issue their own branded cards directly to consumers, eliminating the involvement of an issuing bank. This independence enables greater flexibility in creating and enforcing regulations.

Despite the difficulties in interpreting data for these two brands, one influencer was obvious.

The chargeback-to-transaction ratio shows that payment disputes are still a major concern for merchants — especially for card-not-present transactions. A 1.94% ratio is well above the card networks’ 1% threshold. However, the year-over-year decrease is encouraging.

Merchants in this study were actively managing disputes and attempting to keep risk in check. They had benefited from Midigator’s expert advice and advanced technology. Therefore, the drop in the chargeback-to-transaction ratio suggests that ongoing efforts and professional expertise help prevent chargebacks with greater accuracy.

American Express and Discover don’t have as many brand-supported chargeback prevention tools like those offered by Mastercard and Visa. As a result, American Express and Discover saw an increase in the average chargeback-to-transaction ratio while Mastercard and Visa experienced a decrease. 

Another noteworthy element of the 2020 data is the impact that the COVID-19 pandemic had on the study participants’ chargeback-to-transaction ratio. 

While some merchants and specific industries were negatively impacted by high chargeback counts, the majority of merchants in the study experienced a decrease in their chargeback-to-transaction ratio. Government restrictions and social distancing requirements led to a significant increase in card-not-present transactions during 2020. And because there wasn’t a proportional increase in chargeback activity, online merchants experienced a welcomed perk amidst an otherwise difficult year.

Percent of Revenue Lost to Chargebacks

The absolute “cost” of each chargeback varies and is impacted by several different expenses: lost processing fees, chargeback fines, labor costs for management, and much more. However, since the largest and most easily-defined loss is the transaction amount, monitoring the percent of revenue lost to chargebacks is likely the most accurate gauge of financial impact.

The total amount of revenue lost to chargebacks decreased by 13.41% between 2019 and 2020, totaling a 49.8% reduction over four years. This drop is relative to the decrease in the chargeback-to-transaction ratio.


Again, investing in proven-effective chargeback management strategies yields a positive ROI by reducing the amount of revenue lost to chargebacks.

However, there is no way to guard against all risk. Therefore, merchants are advised to have a plan in place to fight illegitimate chargebacks when they do happen, recover lost revenue, and protect their bottom line.

Why does The Year in Chargebacks report show a decrease in year-over-year trends when other reports show chargeback risks to be intensifying? The difference is an active and ongoing effort to manage risk.

If merchants didn’t do anything to curb the ever-present threat of chargebacks, these charts would look much different. However, the merchants in this study recognize the danger that chargebacks pose to their business, and Midigator has helped them take proactive action to minimize risk as much as possible.

Most Common Reason for Disputes

Why are transactions disputed? What reasons do cardholders and their banks offer?

Four different categories are used to classify chargebacks. These categories vary slightly based on the card brand but can generally be thought of as fraud, cardholder disputes, authorization issues, and processing errors. The cardholder’s bank reviews each case and picks the category (or reason) that seems to be the best fit for the dispute.

For the fourth year in a row, fraud-related disputes accounted for the vast majority of chargebacks. The second most common category was cardholder disputes. Processing errors and authorization issues combined accounted for about 2-3% of chargebacks.


Why are more and more chargebacks classified as fraud? Because the classification process is flawed. 

The cardholder’s bank assigns a reason code to each chargeback before sending it to the merchant. Oftentimes, the reason code assignment is based on limited knowledge and insight.

In most cases, the bank chooses a course of action based on information the cardholder provides. If the cardholder is using the chargeback process incorrectly — a practice commonly referred to as “friendly” fraud — the information provided to the bank could be inaccurate or incomplete. Thus, the reason code doesn’t reflect the real reason for the dispute. 

Win Rates and the ROI of Fighting Chargebacks

Card brand regulations give merchants the right to respond to invalid chargebacks.

An invalid chargeback is an unnecessary or non-compliant payment dispute — a chargeback that shouldn’t have happened.

Some chargebacks are invalid because they don’t follow card brand rules. Other times, a cardholder uses the chargeback process incorrectly, either as an intentional attempt to get something for free or an innocent misunderstanding. 

When disputes are invalid, merchants can and should fight back. Attempting to reverse the chargeback and the resulting revenue loss can significantly improve a business’s bottom line. 

The vast majority of merchants in this study made fighting chargebacks a top priority. Nearly 70% had a win rate above the industry average of 40%.


Other merchants focused on providing the smooth and simple checkout process that today’s consumers demand. Just over 35% of merchants in this study opted out of using identity verification tools.


Unfortunately, this meant they sacrificed revenue recovery in exchange for lower cart abandonment rates and fewer false positives (legitimate purchases that are incorrectly flagged as fraud).

In the last few years, Visa widened the acceptable compelling evidence requirements for reason code 10.4 (Other Fraud – Card Absent Environment). Now chargeback responses need to contain evidence that proves the cardholder’s identity was verified. This can be done with positive matches from address verification service (AVS), card security code (CVV), and Visa Secure (3D Secure). 

Since merchants chose not to use those tools, they didn’t have the evidence needed to win. 

On the other hand, merchants who excelled at collecting required compelling evidence and crafting customized responses were rewarded with impressive results. Midigator helped merchants of all sizes in varying industries excel in multiple metrics — win rates, revenue recovery, return on investment, and reduction in labor hours.

IndustryAverage Amount RecoveredAverage ROIAverage Hours Saved
Accounting & Taxes$9,4101,314%244
Business Services$15,5101,421%71
Business Consulting$34,321168%1,430
Fitness, Sports, & Well-Being$37,332240%877
Flower Delivery$40,846233%1,161
Gadgets & Tech$103,909602%3,006
Insurance & Warranty$6,993396%79
IT & Tech Support$45,9671,136%718
Jewelry & Accessories$57,314416%789
Marketing & Advertising$21,311864%347
People Search$416,117492%20,973
Personal Financial Services$6,577486%271
Real Estate$12,567941%405
Supplements & Skin Care$239,007526%4,531
Web & Software Development$9,616538%383

Length of Time Between the Transaction and Dispute

The chargeback lag time, or amount of time that passes between the transaction date and the chargeback date, provides valuable insight.

Each chargeback has a time limit — a deadline for when the cardholder’s bank must submit the dispute. The amount of time available and the specified start date vary based on the reason code used to dispute the transaction. However, most chargebacks must be filed within 75, 90, or 120 days of the original transaction.

While the overall trend for chargeback lag time seems nearly identical in a year-over-year analysis, there were actually a few important differences to take note of.


Chargebacks were filed very quickly in 2019 — the lag time was shorter than it had ever been before. This was primarily driven by the Visa Claims Resolution (VCR) initiative that placed a heavy emphasis on technology; workflows switched from manual processes to automation. 

While many of the lag time trends and the reasons driving those outcomes remained constant in 2020, other influencers — such as the COVID-19 pandemic — were added.

The 2020 lag time was still shorter than it had been in 2017 and 2018 but longer than 2019. Fewer disputes were processed within the first week, and more chargebacks were initiated several months after the transaction.


Previous annual reports have found that the lag time for authorization-related disputes is the shortest of the four categories, and 2020 was no exception. 


However, an interesting discovery this year was that cardholder disputes had a longer lag time than usual. This may have been the result of COVID-related cancellations. Products and services that normally would have been received by consumers were not, which led to more chargebacks being filed.


It’s important to monitor chargeback lag times because the insight can help improve management efforts. For example, if the majority of chargebacks happen on day seven, merchants might want to reach out to their customers on day six to gauge satisfaction and address any issues.

It’s encouraging to learn that lag times are decreasing, despite the tumultuous year that COVID-19 caused. The sooner merchants learn about hidden problems, the quicker they can solve them and prevent future disputes from happening.


When Mastercard’s free trial rules went into effect in April 2019, some of the study participants had to adjust their business practices in order to comply with updated regulations. As a result, chargebacks increased before merchants were able to fully adapt to the new norm. 

And even though 2020 started out fairly mundane, it quickly took an unexpected turn for many merchants. As the COVID-19 pandemic unfolded globally, chargeback activity increased before stabilizing.

While it is possible to draw conclusions based on generalized trends, individual merchant results will likely be unique and driven by the unique products or services sold. In order to gain the most helpful insights, merchants should analyze their own monthly trends. 

When doing so, it’s important to analyze monthly trends within the context of chargeback lag time. Roughly half of disputes are filed within a month of the transaction. Another 26.15% happen between 30 and 60 days. Therefore, monthly trends typically relate to activity that took place one to two months prior.

Despite these challenges, chargeback trends became somewhat consistent in recent years. Seasonal influxes in transaction volume played a less significant role than they had in the past. New card brand technologies and processes have gained adoption, refinement, and clarity to prevent non-compliant disputes with greater consistency.


Countries with the Highest Chargeback Rates

When expanding into new markets, merchants should evaluate the revenue potential of each individual country versus the anticipated risk. 

This year’s report calculated the chargeback-to-transaction ratio for cardholder locations with 10,000 or more annual transactions.


In previous years, several countries had fairly uniform trends in a year-over-year analysis. They either had consistently high or consistently low chargeback-to-transaction ratios. However, very few of those trends remained in 2020. 

While many of the 2019 low-risk countries retained a fairly safe chargeback-to-transaction ratio in 2020, overall activity increased in those regions. In fact, 31 of the 47 countries in the study (or 65.96%) experienced an increase in their chargeback-to-transaction ratio between 2019 and 2020.


These shifting trends were likely driven by three significant variables. 

First, the COVID-19 pandemic caused consumers to interact with ecommerce in new ways. Some consumers were forced to make their first-ever ecommerce purchase while many veteran shoppers experimented with purchases in industries they’d never tried before. Other consumers started buying items in bulk. 

One study found that 60% of shoppers between the ages of 16 and 24 (a generally inexperienced demographic prone to friendly fraud) in Brazil (the country with the highest chargeback-to-transaction ratio) admitted that they were shopping online more in 2020 than they did before the outbreak. And the most popular items purchased online in Brazil shifted from clothes and accessories in 2018 to food and beverages in 2020 — just 22% of consumers had purchased food and beverages items online in 2018 compared to 54% in 2020. 

The newness and unfamiliarity for shoppers likely contributed to an influx in both intentional and accidental friendly fraud in many countries. For example, a shopper in Australia accidentally bought 48 boxes of toilet paper when she intended to purchase 48 rolls — she had enough toilet paper to last 12 years! 

While the results of shifting customer demographics were damaging in many regions, there was a silver lining: since consumers broadened their shopping preferences, there was less concentration for a single industry or merchant. Fewer customers filed multiple chargebacks, and the number of repeat offenders in 2020 was less than 2019. 


There was another reason why chargebacks increased in many countries: payment fraud. Again, this was likely driven, in part, by the COVID-19 pandemic. 

There were dozens of reasons why fraud became harder to manage. For example, more online purchases created more opportunities for payment card information to be stolen, an influx in transaction volume made it easier for fraudulent transactions to go undetected, new customers with little to no shopping history skewed risk decisioning rules, and more.

In May, 60% of surveyed global merchants said payment fraud had increased in 2020. By November, the number of merchants with a fraud problem had increased to 72%. And, 82% expect the threat to continue to increase over the next year.

The fluctuating year-over-year trends emphasize a noteworthy insight: evaluating risk on a country-by-country basis should be a dynamic process. 

It’s normal for consumer preferences to vary from region to region and from year to year. But COVID-19 has forever changed ecommerce on a global scale. It altered behaviors in a way that couldn’t have been anticipated before nor predicted now. 

Going forward, merchants need to rely heavily on data analysis. International expansion could easily become an unmanageable risk if it is based on hunches and guesses instead of educated decisions.

Lastly, chargeback activity likely increased because of data breaches. 

By the end of June, 2020 had already been named “the worst year on record” for data breaches. Personal information stolen from unsuspecting cardholders was used to place unauthorized transactions, leading to greater chargeback activity. 

Despite an increasing ratio for many countries, the study’s overall chargeback-to-transaction ratio decreased because it was heavily influenced by activity in the United States. The U.S., with 90.44% of total transaction volume, had a ratio of just 1.81% — a 54.43% decrease from 2019.

Percent of Chargebacks Prevented

The most effective chargeback prevention strategies are the result of a multi-layer approach — multiple tools and actions applied at various points of the customer experience. While a multi-layer strategy is most effective, it is often difficult to determine the outcome of each individual prevention effort.

Moreover, some strategies have accurate metrics to gauge chargeback prevention but don’t factor in the risk of false positives.

However, there are two prevention techniques that won’t increase customer friction or turn away good sales while also providing accurate data to monitor effectiveness: chargeback prevention alerts and order validation tools (VMPI, Order Insight, and Consumer Clarity).

In 2020, these tools enabled merchants to resolve nearly half of all disputes before they progressed to costly and damaging chargebacks.


The Impact of COVID-19

The COVID-19 pandemic has had a significant impact on nearly all businesses in all industries in all regions of the world. Everything from customer service and refunds to inventory and shipping was affected. 

For some merchants, chargeback management strategies and workflows were also altered. For example, news outlets, payment processors, and merchant surveys revealed that businesses commonly struggled with the following.

  • Teams forced to work remotely were not able to receive their chargeback notices because they were mailed to closed offices.
  • If chargeback notices were received, they often arrived after the response deadline because mail services were slowed by increased demand. 
  • Because of the countless threats that challenged day-to-day operations — inventory shortcomings, shipping delays, social distancing requirements — fighting chargebacks and recovering lost revenue stopped being a priority. 
  • Teams with manual processes were unable to keep pace and meet deadlines when chargeback volume increased. 
  • Businesses without sufficient systems for data analysis were unable to evaluate the effectiveness of their strategies. 
  • Merchants were confused by new and changing regulations. For example, they were unsure if they were required to issue a refund for canceled services or if a credit voucher was allowed. 
  • Increased transaction volumes brought increased fraud threats that merchants were unprepared for. 

Like millions of other businesses around the world, the merchants included in The Year in Chargebacks report were also affected by the COVID-19 pandemic. But fortunately, chargeback management was not one of the areas of business that was significantly impacted. 

Because the merchants in this study were benefiting from Midigator’s expert advice and advanced technology — many for more than five years — their experience differed from the norm. While other merchants struggled with chargeback management, Midigator simplified the complexities brought about by COVID-19.

Instead of receiving chargeback notices by mail, Midigator creates direct connections to processor and acquirer portals. Throughout the pandemic, our merchants continued to receive real-time notifications even if their offices were closed, their teams were remote, and the mail deliveries were delayed. As a result, merchants were still able to fight a significant percent of disputes year-over-year.


Because Midigator’s services are based on advanced automation and easy-to-use workflows, the technology made it easy for merchants to scale their processes as chargeback volume increased. It also meant that merchants could keep revenue recovery as a top priority amidst the new and evolving pandemic challenges.

One of Midigator’s specialities is providing real-time reporting and in-depth analytics. These valuable insights helped merchants easily evaluate the effectiveness and ROI of their strategies as management tactics shifted throughout the year. 

Midigator’s team is made up of industry experts with years of experience, and we have established relationships with respected industry partners. We were able to interpret and advise our merchants on difficult-to-understand policies so they could minimize financial losses. Account managers also helped merchants anticipate potential threats and take proactive steps — like adding additional fraud detection tools — to reduce risks before they became unmanageable liabilities.


There were dozens of hard lessons learned during the COVID-19 pandemic. Perhaps one of the most important realizations is that stability is an illusion that can be shattered at any moment. A business that is functioning normally and successfully one day could be completely disrupted the next. 

During these times, it’s important to ask for help. Advice from experts can replace hunches and guesses with educated decisions. The merchants in this study trust Midigator’s insights and services to remove the complexities of payment disputes so they can focus on growing their business — in both good times and bad.


The Year in Chargebacks report provides unprecedented insights. The data serves as a valuable benchmark for merchants to evaluate their own individual chargeback management efforts. 

If you’d like to achieve the same results as the merchants in this study, Midigator can help.

At Midigator, we believe the challenge of running a business should be delivering great products or services, not managing payment risk. Let us handle the chargebacks so you can focus on growing your business.

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