Protect Your Revenue and Safeguard Your Business from Rising Chargeback Rates

Introduction: Understanding the Chargeback Epidemic

$8.9 Billion Lost to Chargebacks Last Year – Is Your Business Next?

Chargebacks are costing merchants more than just lost sales. They erode customer trust, inflate operational costs, and threaten merchant accounts with higher processing fees or even account termination.

For high-risk merchants—including digital goods providers, subscription services, crypto exchanges, and international e-commerce stores—the impact is even more severe.

In 2025, chargeback rates are rising faster than ever, driven by increasingly sophisticated fraud tactics and growing consumer awareness of dispute processes.

High-risk industries are facing a surge in friendly fraud, subscription disputes, and international chargebacks. Without an effective prevention strategy, businesses risk significant revenue loss and reputational damage.

But it doesn’t have to be this way. In this comprehensive guide, we explore the top challenges faced by high-risk merchants and provide actionable strategies to prevent chargebacks before they happen.

We also reveal the most advanced chargeback management solution, specifically designed to protect revenue from credit and debit card transactions.

Are you ready to take control of chargebacks and safeguard your business? Let’s get started.

Chapter 1: Why High-Risk Merchants Face Higher Chargeback Rates

Are You in the Crosshairs? Why High-Risk Merchants Are Prime Targets for Chargebacks

High-risk merchants are particularly vulnerable to chargebacks due to the nature of their products, payment models, and customer behavior patterns. Industries like digital goods, subscription services, and crypto exchanges are frequent targets for fraudsters exploiting the digital landscape. Here’s why:

1. Digital Goods and Downloads

Digital products, including software, e-books, and virtual content, are easily accessible and non-returnable. Fraudsters take advantage of this by purchasing digital goods with stolen credit cards or disputing legitimate transactions to receive free products.

2. Subscription Services

Subscription-based business models, such as SaaS platforms and streaming services, face a high risk of disputes over recurring payments. Customers often forget about subscriptions, leading to disputes over automatic renewals. Additionally, fraudsters manipulate free trials to exploit recurring billing.

3. Crypto Exchanges and NFT Marketplaces

Crypto exchanges and NFT marketplaces are prime targets for fraud due to the pseudonymous nature of blockchain transactions. Fraudsters use stolen credit cards linked to crypto wallets, leading to chargebacks. Moreover, counterfeit NFTs and phishing scams are on the rise.

4. Cross-Border Transactions

High-risk merchants dealing with international customers face increased fraud risk due to currency discrepancies, regulatory differences, and delivery disputes. Cross-border fraud is particularly challenging to resolve, resulting in more chargebacks.

Chapter 2: The True Cost of Chargebacks

Chargebacks Are More Than Lost Sales – Discover the Hidden Costs Draining Your Revenue

Chargebacks cost merchants far more than the original transaction amount. Beyond lost revenue, they involve hidden costs that can significantly impact profitability. Let’s break down the true cost of chargebacks:

1. Revenue Loss

When a chargeback is filed, the revenue is forfeited, and the product is typically unrecoverable. This is especially damaging for digital goods where delivery is instant and irreversible. For example, a digital goods merchant loses $50 per transaction but faces $150 in total costs after fees and operational expenses.

2. Operational Costs

Manual dispute handling consumes time and resources, increasing operational costs. High-risk merchants often require dedicated teams to manage chargebacks, escalating overhead expenses. For a growing e-commerce business, this could mean thousands of dollars in additional labor costs.

3. Dispute Fees and Penalties

Merchants pay up to $100 per transaction in dispute fees. Additionally, high chargeback ratios can lead to increased processing fees or account termination, threatening the business’s ability to accept payments.

4. Reputational Damage

Chargebacks not only impact finances but also damage brand reputation. High chargeback rates erode customer trust, making it difficult to retain loyal customers and attract new ones. Merchants labeled as “high risk” may struggle to find payment processors, affecting long-term growth.

Example:
A digital goods merchant selling software faces a high rate of friendly fraud disputes, resulting in revenue losses, increased dispute fees, and operational costs. Without an effective chargeback prevention strategy, the merchant risks becoming unprofitable.

Chapter 3: Common Chargeback Scenarios in High-Risk Industries

Are These Costly Chargeback Scenarios Hurting Your Business?

High-risk merchants encounter unique chargeback scenarios that require specialized prevention strategies. Here are the most common scenarios affecting e-commerce, digital goods, subscription services, and crypto exchanges:

1. Friendly Fraud

●      Scenario: Customers dispute legitimate transactions, claiming non-delivery or unauthorized purchases.

●      Impact: High rates of friendly fraud are affecting digital goods, especially software and e-books. This is challenging to combat due to the intangible nature of the products.

●      Example: A customer purchases an e-book, downloads it, and then disputes the transaction, claiming they never received the product.

2. Subscription Renewal Disputes

●      Scenario: Customers forget about subscriptions or misunderstand recurring billing, leading to disputes over automatic renewals.

●      Impact: SaaS platforms and streaming services face increased disputes over subscription renewals and trial period conversions.

●      Example: A customer signs up for a free trial, forgets to cancel, and disputes the first payment, claiming unauthorized billing.

3. Cross-Border Fraud

●      Scenario: Fraudsters exploit currency discrepancies, regulatory gaps, and delivery disputes in international transactions.

●      Impact: Cross-border fraud affects e-commerce merchants selling luxury goods, fashion, and electronics.

●      Example: A fraudster uses a stolen credit card to purchase high-value electronics from an international e-commerce store, leading to a chargeback.

4. Crypto and NFT Chargebacks

●      Scenario: Chargebacks linked to credit or debit card purchases for crypto transactions or NFTs.

●      Impact: Crypto exchanges and NFT marketplaces are facing chargebacks due to counterfeit NFTs, phishing scams, and unauthorized purchases linked to crypto wallets.

●      Example: A customer buys an NFT using a credit card, claims it was unauthorized, and initiates a chargeback after transferring the asset.

Chapter 4: Chargeback Prevention Strategies for High-Risk Merchants

Tired of Losing Revenue to Chargebacks? Here’s How to Fight Back.

High-risk merchants face unique challenges when it comes to preventing chargebacks. Whether you’re selling digital goods, managing recurring subscriptions, or operating a crypto exchange, effective prevention strategies are essential to protect your revenue and reputation.

Here’s how to proactively minimize chargebacks and safeguard your business:

1. Clear and Transparent Billing Descriptions

Confusing Billing Statements Are Fueling Chargebacks – Here’s How to Fix It

●      Why It Matters: Vague or misleading billing descriptors are a common reason for chargebacks, as customers may not recognize the charge on their statement.

●      Best Practice: Use clear, recognizable billing descriptors that match your brand name and product description. Avoid abbreviations or generic terms.

●      Example: Instead of “XYZ Inc.” use “XYZ Digital Subscription” to clarify the purchase.

●      Tip: Send purchase confirmation emails with billing details to reduce disputes.

2. Transparent Refund and Cancellation Policies

Prevent Chargebacks Before They Happen – With Clear Refund Policies

●      Why It Matters: Customers who don’t understand refund or cancellation policies are more likely to initiate chargebacks. This is especially true for digital goods and subscription renewals.

●      Best Practice: Display refund and cancellation policies prominently on your website, checkout pages, and email confirmations. Make them easy to understand with clear terms and conditions.

●      Example: Clearly state “Subscription renewals are non-refundable once processed” to avoid disputes over recurring payments.

●      Tip: Provide a self-service cancellation option to improve customer satisfaction and reduce disputes.

3. Advanced Fraud Detection Tools

Fraudsters Are Getting Smarter – Your Detection Tools Should Too

●      Why It Matters: As fraud tactics become more sophisticated, relying solely on traditional fraud detection methods is no longer sufficient. High-risk merchants need advanced tools to detect and block suspicious activities in real-time.

●      Best Practice: Implement AI-driven fraud detection systems that analyze transaction patterns and flag anomalies.

●      Example: A crypto exchange can use real-time fraud alerts to prevent unauthorized purchases linked to stolen credit cards.

●      Tip: Continuously update fraud detection rules to adapt to evolving fraud tactics.

4. Strong Authentication Measures

Stop Unauthorized Transactions with Stronger Authentication

●      Why It Matters: Weak authentication processes leave merchants vulnerable to account takeovers and unauthorized transactions.

●      Best Practice: Implement two-factor authentication (2FA) and 3D Secure (3DS) verification for online purchases, especially for high-value transactions.

●      Example: Requiring OTP (One-Time Password) verification for all credit card purchases reduces fraud risk.

●      Tip: Educate customers on the importance of secure authentication to build trust and loyalty.

5. Proactive Customer Communication

Solve Disputes Before They Become Chargebacks

●      Why It Matters: Many chargebacks result from customer misunderstandings or dissatisfaction. Proactive communication helps resolve issues before they escalate into disputes.

●      Best Practice: Send purchase confirmations, shipping updates, and subscription renewal reminders to keep customers informed.

●      Example: Notify customers 7 days before a subscription renewal to reduce “unauthorized transaction” disputes.

●      Tip: Provide responsive customer support through multiple channels, including email, live chat, and social media.

Chapter 5: How To Solve Chargeback Challenges

Want to Stop Chargebacks Before They Happen? 

Prevent, fight, and analyze chargebacks—specifically for transactions made using credit or debit cards. Here’s how to protect high-risk merchants from rising chargeback rates:

1. Real-Time Fraud Detection

Detect Fraud Before It Escalates – With Near Real-Time Alerts

●      How It Works: Combined alerts from Ethoca and Verifi provide near real-time notifications, allowing merchants to detect fraudulent activities before they become chargebacks.

●      Why It’s Effective: By stopping fraud at the source, help merchants minimize disputes and protect their revenue.

●      Example: An e-commerce merchant detects a fraudulent purchase linked to a stolen credit card and prevents the chargeback by issuing a proactive refund.

●      Specifically Designed For: Purchases made using credit or debit cards, ensuring proactive fraud prevention.

2. Automated Chargeback Management

Stop Wasting Time on Manual Dispute Handling

●      How It Works: Automate dispute responses with customizable workflows, reducing manual intervention and operational costs.

●      Why It’s Effective: Automated workflows streamline chargeback management, minimizing delays and human errors.

●      Example: A subscription service uses automated workflows to respond to recurring payment disputes, reducing friendly fraud chargebacks.

●      Specifically Designed For: Digital goods, subscription renewals, and cross-border transactions.

3. Customizable Prevention Rules

Stay One Step Ahead with Tailored Fraud Detection

●      How It Works: Allow merchants to set custom rules to block suspicious transactions in real-time.

●      Why It’s Effective: Tailored prevention rules enable merchants to adapt to evolving fraud tactics and protect high-risk transactions.

●      Example: A crypto exchange customizes fraud rules to block high-risk transactions from specific countries.

●      Specifically Designed For: Digital goods, subscription renewals, cross-border transactions, and high-value purchases.

4. Comprehensive Reporting & Analytics

Make Data-Driven Decisions to Minimize Risks

●      How It Works: Provide real-time dashboards with actionable insights into chargeback trends and fraud patterns.

●      Why It’s Effective: Data-driven strategies help merchants proactively minimize risks and optimize dispute management.

●      Example: A digital goods provider uses analytics to identify patterns in friendly fraud disputes and adjusts prevention rules accordingly.

●      Specifically Designed For: High-risk merchants looking to optimize chargeback strategies.

5. Multi-Card Network Support

Holistic Fraud Prevention Across All Major Card Networks

●      How It Works: Integrates seamlessly with Visa, Mastercard, American Express, JCB, and Discover, ensuring comprehensive fraud prevention.

●      Why It’s Effective: Multi-card network support provides broader coverage and faster resolution times for international disputes.

●      Example: An e-commerce merchant selling luxury goods reduces cross-border chargebacks by leveraging multi-network fraud prevention.

●      Specifically Designed For: Credit and debit card transactions, including international purchases.

Chapter 6: Real-World Success Stories

Here are real-world success stories:

1. E-commerce Merchant: Reducing Chargebacks by 60%

Challenge:
An e-commerce merchant selling digital goods faced high rates of friendly fraud disputes, resulting in significant revenue loss and increased dispute fees. The merchant struggled with manual dispute handling, leading to operational inefficiencies and rising chargeback ratios.

Solution:

●      Implemented Real-Time Fraud Detection with near real-time alerts from Ethoca and Verifi.

●      Used Customizable Prevention Rules to block high-risk transactions and reduce friendly fraud.

●      Automated dispute responses with Intelligent Chargeback Management workflows.

Outcome:

●      60% Reduction in Chargebacks within three months.

●      $384,000 Annual Revenue Saved by preventing friendly fraud disputes.

●      Improved operational efficiency with a 50% Reduction in Manual Dispute Handling.

2. SaaS Subscription Service: Eliminating Recurring Billing Disputes

Challenge:
A SaaS company faced recurring payment disputes due to subscription renewals and trial period conversions. Customers often forgot about their subscriptions, leading to chargebacks labeled as “unauthorized transactions.” The manual dispute process was time-consuming and costly.

Solution:

●      Enabled Real-Time Alerts for subscription transactions to detect disputes before they escalated into chargebacks.

●      Deployed Customizable Prevention Rules to monitor subscription renewals and prevent unauthorized disputes.

●      Utilized Comprehensive Reporting & Analytics to identify patterns in subscription disputes.

Outcome:

●      70% Reduction in Subscription Chargebacks by proactively managing recurring billing disputes.

●      $250,000 in Revenue Protected by minimizing friendly fraud.

●      Enhanced customer satisfaction with Automated Renewal Reminders and transparent billing.

3. Crypto Exchange: Safeguarding Revenue from Credit Card Disputes

Challenge:
A crypto exchange faced chargebacks due to unauthorized purchases made using stolen credit cards linked to crypto wallets. Additionally, counterfeit NFTs and phishing scams resulted in disputes over digital asset transactions.

Solution:

●      Integrated Near Real-Time Fraud Detection to detect unauthorized transactions before they became chargebacks.

●      Utilized Customizable Prevention Rules to block high-risk transactions from specific countries and monitor suspicious activities.

●      Implemented Multi-Card Network Support for Visa, Mastercard, Amex, JCB, and Discover to ensure holistic fraud prevention.

Outcome:

●      80% Reduction in Credit Card Chargebacks related to crypto purchases.

●      $500,000 in Revenue Secured by preventing fraudulent transactions and disputes.

●      Enhanced trust and loyalty among customers, increasing transaction volumes by 30%.

Chapter 7: Actionable Checklist – 10 Steps to Minimize Chargebacks

Ready to Take Control of Chargebacks? Here’s How to Get Started.

Implementing a chargeback prevention strategy doesn’t have to be complicated. This actionable checklist provides practical steps for high-risk merchants to minimize chargebacks and protect their revenue. Use it as a roadmap to safeguard your business from disputes and fraud.

Step 1: Implement Clear Billing Descriptions

●      Use recognizable billing descriptors that match your brand name and product.

●      Avoid abbreviations or generic terms that could confuse customers.

●      Include contact information for easy dispute resolution.

Step 2: Display Transparent Refund and Cancellation Policies

●      Make refund and cancellation policies easily accessible on your website and checkout pages.

●      Clearly state terms and conditions to avoid confusion and disputes.

●      Send policy reminders in purchase confirmation emails.

Step 3: Use Advanced Fraud Detection Tools

●      Implement AI-driven fraud detection systems to identify suspicious activities.

●      Continuously update fraud detection rules to adapt to emerging fraud tactics.

●      Integrate Real-Time Fraud Detection for proactive fraud prevention.

Step 4: Enable Strong Authentication Measures

●      Use two-factor authentication (2FA) and 3D Secure (3DS) for credit and debit card purchases.

●      Educate customers on secure authentication practices to build trust.

●      Monitor high-value transactions for additional verification.

Step 5: Communicate Proactively with Customers

●      Send purchase confirmations, shipping updates, and subscription renewal reminders.

●      Provide responsive customer support to resolve issues before they escalate.

●      Offer self-service cancellation options to reduce disputes.

Step 6: Customize Fraud Prevention Rules

●      Tailor fraud detection settings to block suspicious transactions in real-time.

●      Adapt rules for digital goods, subscription renewals, and cross-border transactions.

●      Leverage Customizable Prevention Rules to stay ahead of fraud.

Step 7: Automate Dispute Responses

●      Use Automated Chargeback Management to minimize manual intervention.

●      Set up custom workflows to streamline dispute handling and reduce operational costs.

●      Ensure consistent and timely responses to chargebacks.

Step 8: Monitor Chargeback Trends and Analytics

●      Use Comprehensive Reporting & Analytics to gain insights into chargeback patterns.

●      Identify trends in friendly fraud, recurring billing disputes, and international transactions.

●      Adjust prevention strategies based on data-driven insights.

Step 9: Leverage Multi-Card Network Support

●      Integrate Multi-Card Network Support for Visa, Mastercard, Amex, JCB, and Discover.

●      Protect revenue from credit and debit card disputes across multiple payment networks.

●      Ensure consistent fraud prevention for international transactions.

Conclusion and Call-to-Action:

Chargebacks don’t have to be an unavoidable cost of doing business. By implementing these strategies and leveraging advanced solutions, high-risk merchants can proactively protect their revenue from credit and debit card disputes.

Take Control of Chargebacks Today. Discover how you can transform your chargeback management.

By: Rolands Selakovs