How Ethoca helps prevent chargebacks, reduce revenue loss and improve customer experience

Chargebacks play an important role in protecting consumers from fraud and unauthorized transactions. However, for retailers and issuers, chargebacks often represent a significant operational expense that can create friction, increase costs and impact the customer experience.

As digital commerce continues to grow, so does the volume of disputes and chargebacks. Mastercard's State of Chargebacks Report projects annual chargeback volume will reach 334 million by 2028, while retailers report that 21% of chargebacks are linked to first-party fraud.

For retailers and issuers, success increasingly depends on preventing disputes before they become chargebacks.

A chargeback occurs when a cardholder disputes a transaction and the issuer returns funds to the customer while the transaction is investigated. While chargebacks are designed to protect consumers, they often create costs for retailers even when the purchase was legitimate.

A typical chargeback process includes:

• A cardholder reviews a transaction and believes it is unauthorized.
• The cardholder contacts their financial institution.
• The issuer investigates the claim and may refund the cardholder.
• The retailer is notified days or weeks later.
• The retailer may accept the chargeback or challenge it through representment.
• Operational costs, fees and potential revenue losses are incurred regardless of the outcome.

By the time many retailers become aware of a dispute, opportunities to resolve the issue have already passed.

While fraud remains a major driver of disputes, not all chargebacks are caused by fraudulent activity.  Many stem from issues that could potentially be resolved earlier through increased transparency and better communication.

True fraud, also known as third-party fraud, occurs when stolen payment credentials or account information are used to conduct unauthorized transactions. These disputes require immediate action to prevent additional financial loss.

First-party fraud, often called friendly fraud, occurs when a cardholder disputes a transaction that was legitimate. This may happen because they do not recognise the charge, forget making the purchase, or intentionally misuse the dispute process. 

According to Mastercard and Javelin research, Chargebacks: The Case for Coordination approximately one in five disputes are associated with first-party fraud.

Transaction confusion has become a growing source of disputes as consumers transact across retailers, subscriptions, marketplaces and digital channels. When a retailer descriptor appears unfamiliar, consumers may incorrectly assume fraud and contact their issuer. 

Mastercard and Datos Insights research found that 48% of consumers have disputed a charge they later realised was legitimate, demonstrating the significant role transaction confusion plays in chargeback volume.

Chargebacks also occur when customers experience delivery delays, damaged goods, refund concerns or other service-related issues. Rather than contacting the retailer directly, some consumers choose to initiate a dispute through their financial institution.

The true cost of a chargeback extends well beyond the transaction amount itself.

Retailers may face:

• Lost revenue from disputed transactions
• Operational costs associated with dispute processing
• Chargeback fees imposed by acquirers and processorsInventory or service losses
• Increased fraud-related expenses
• Potential chargeback monitoring program implications

For issuers, disputes also create call centre costs, operational complexity and customer experience challenges.

Ethoca helps retailers and issuers reduce disputes and avoid unnecessary chargebacks through a collaborative network that enables greater visibility into transactions and faster information sharing.

Many disputes begin because consumers lack the information needed to recognize a purchase.

Ethoca Consumer Clarity™ enables retailers to provide enhanced transaction information, including merchant names, logos, purchase details and transaction history through issuer digital banking experiences and customer service channels.

When consumers can quickly identify a purchase, they are less likely to initiate an unnecessary dispute.  67% of consumers would dispute fewer transactions if more purchase details were available in banking apps

Benefits include:

• Reduced transaction confusion
• Fewer customer disputes
• Lower first-party fraud losses
• Improved customer experiences
• Revenue preservation through dispute deflection

When disputes do occur, timing becomes critical.

Ethoca Alerts enables near real-time sharing of fraud and dispute information between issuers, acquirers and retailers, allowing retailers to investigate and respond before a chargeback is initiated. 

Retailers can:

• Stop fulfillment of potentially fraudulent orders 
• Respond to customer issues earlier
• Issue refunds when appropriate
• Reduce operational costs
• Prevent disputes from progressing into chargebacks

Mastercard reports that Ethoca Alerts helped prevent more than 39 million chargebacks in 2025 and more than 110 million chargebacks since 2011. Mastercard also reports $1 billion in fraud prevented during 2025 through Ethoca Alerts.

One of the most significant benefits of reducing chargebacks is protecting revenue that would otherwise be lost.

By helping issuers and retailers identify legitimate transactions earlier in the dispute lifecycle, Ethoca Consumer Clarity™ can help deflect unnecessary disputes before claims are created. 

This helps retailers retain legitimate sales, reduce revenue leakage and create a smoother customer experience while limiting unnecessary card reissuance and payment disruption.