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Artículo: What is chargeback and how to protect your e-commerce?

O que é chargeback e como proteger seu e-commerce?

What is chargeback and how to protect your e-commerce?

E-commerce has experienced exponential growth over the past few decades, providing convenience to consumers but also presenting unique challenges to merchants. One of these challenges is chargeback, a term that has become increasingly relevant in the ecommerce scenario.

Understanding chargeback:

A chargeback occurs when a consumer disputes a transaction directly with the credit card company. This usually occurs due to reasons such as fraud, products not received, defective products or discrepancies between what was promised and what was delivered. When a chargeback is initiated, the transaction amount is returned to the consumer, and the merchant may face additional fees and loss of the product or service.

Common causes of chargebacks:

  1. Fraud: Fraudulent transactions are one of the main reasons for chargebacks. Criminals use stolen information to make purchases, and when the legitimate cardholder realizes the fraud, they initiate a chargeback.
  2. Products or services not received: If customers don't receive what they purchased, whether due to delivery delays or logistical issues, they can request a chargeback.
  3. Defective or not as advertised products: If delivered products do not meet customer expectations, whether due to defects or discrepancies from the description, this may lead to chargebacks.
  4. Unauthorized charging: Some charges may be made without the customer's explicit authorization, resulting in disputes.

Difference between chargeback, chargeback and refund:






Dispute of a transaction by the customer with the credit card administrator, resulting in the refund of the amount to the consumer.

Cancellation of a transaction by the card issuer, usually due to fraud or error in the transaction.

Return of the amount to the customer by the merchant as a result of a request or dissatisfaction, without the intervention of the card administrator.


Responsibility of the merchant, who may suffer penalties and additional fees.

Liability of the card issuer (customer bank) in case of fraud or error.

Responsibility of the merchant, who may decide to refund the customer for reasons such as dissatisfaction or problems with the product or service.

Process Started by

Customer, who disputes directly with the card administrator.

Usually initiated by the card issuer upon detection of fraud or error.

Customer, who requests the merchant to return the amount paid.

Cost to the Merchant

It may result in additional costs, fees and loss of product or service.

It may involve payment processor fees, but the cost is usually borne by the card issuer.

It may involve processing fees, but the cost is borne by the merchant.

Common Motivations

Fraud, products not received, defective products, unauthorized billing.

Fraud, processing error, unrecognized transaction.

Customer dissatisfaction, defective products, delays in delivery.


Who is responsible for chargeback?

Chargeback liability may vary depending on the specific circumstances that led to the disputed transaction. Generally, responsibility falls on one of the following parties:


  • The merchant is often held liable when the chargeback is the result of defective products, services not delivered as promised, unauthorized charges, or any other situation where the customer has a legitimate justification to dispute the transaction.
    • Lack of transparency in return policies, inadequate product or service descriptions, or failure to resolve customer issues can increase the likelihood of merchant liability.

Card issuing bank:

  • The card issuing bank is responsible in chargeback cases related to fraud, unrecognized transactions or any suspicious activity that occurs without the cardholder's authorization.
  • If the card issuer detects a fraudulent transaction and initiates a chargeback, the liability usually falls to the issuing bank.

Cardholder (customer):

    • In some cases, liability may be attributed to the cardholder if it becomes clear that the chargeback was initiated unreasonably, for example, if the customer attempts to dispute a legitimate transaction.

    To mitigate the risk of chargebacks, merchants must adopt strong security practices, transaction transparency, and effective customer service.

    Main flows of a chargeback

    Initial dispute by the cardholder:

      • The cardholder notices an unrecognized transaction, an improper charge, a product not received, among other reasons, and decides to dispute the transaction.
      • The customer contacts the card issuer (the bank that issued the credit card) to initiate the chargeback process.

    Notification to merchant:

      • After the dispute, the card issuer notifies the merchant of the disputed transaction, providing details about the reason for the chargeback.
      • The merchant may receive a notice through the payment processor or directly from the card issuer.

      Investigation by the trader:

        • The merchant initiates an internal investigation to determine the validity of the dispute.
        • The merchant checks transaction records, delivery information, customer communications, and any other relevant evidence.

        Merchant response:

          • Based on the investigation, the merchant prepares a documented response, presenting evidence supporting the validity of the transaction.
          • The response is sent to the payment processor or card issuer.

          Analysis by the card administrator:

            • The card issuer reviews the merchant's response and the evidence presented.
            • The administrator assesses whether the dispute is valid and decides whether to accept or reject the chargeback.

            Return of funds to the cardholder:

              • If the chargeback is accepted, the card issuer reverts the funds to the cardholder's account.
              • The merchant suffers a financial loss corresponding to the value of the transaction plus any chargeback fees.

              Additional costs and consequences:

                • In addition to the direct financial loss, the merchant may face additional costs such as chargeback fees, penalties and impacts on the business reputation.
                • In severe cases, there may be restrictions on the merchant's ability to accept card payments.

                Feedback and continuous improvement:

                  • The merchant can use information obtained during the process to improve customer service policies, transaction processes and fraud prevention, aiming to avoid future chargebacks.

                  It's crucial for merchants to adopt proactive practices to prevent chargebacks, such as implementing security measures, maintaining clear return policies, and offering effective customer service. Prevention is often more effective than dealing with chargebacks after they occur.

                  How to protect your e-commerce

                  Transparency in descriptions:

                  Provide detailed and accurate descriptions of the products or services offered, thus minimizing the possibility of customer dissatisfaction.

                  Identity Verification:

                  Implement security measures, such as identity checks, to reduce the occurrence of fraudulent transactions.

                  Secure processing:

                  Use secure payment gateways and comply with data security standards such as PCI DSS (Payment Card Industry Data Security Standard).

                  Clear return policies:

                  Establish transparent return policies and provide effective communication channels to resolve issues before customers resort to chargebacks.

                  Transaction monitoring:

                  Regularly monitor transactions to identify suspicious patterns and fraudulent activity.

                  Efficient customer support:

                  Offer efficient customer support to resolve issues quickly and prevent customers from resorting to drastic measures like chargebacks.

                  Order status notifications and updates:

                  Keep customers informed about the status of their orders through automatic notifications, reducing uncertainty and the likelihood of chargebacks.


                    Facing chargeback can be challenging for those who sell online, but it can be managed efficiently by implementing solid security, transparency and customer service practices.

                    We are here to help you deepen this knowledge and take proactive measures. Visit our website now to explore exclusive courses and specialized articles about ecommerce and Shopify, taught by experts who are innovating in the market.

                    Learn from those on the front line and strengthen your company, building trust with consumers and ensuring safe and satisfactory transactions.

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