The best time to stop a chargeback? Before it starts

We all know the sinking feeling — or maybe a flutter of panic — that sets in when we log in to our mobile banking app and discover a charge we don’t recognize.

Often, the transaction turns out to be legitimate, requiring no further action. But there’s always the looming possibility that someone accessed your account, even depleted your funds without your knowledge or consent.

For merchants and issuers, payment disputes have become an even more significant headache, with troubling implications. “The scale and sophistication of scams are increasing, e-commerce transactions are growing, and fraud is on the rise,” says Melanie Fuller, senior vice president of Consumer Clarity and Disputes products at Ethoca, a Mastercard company.

The cost of payment dispute resolutions — whether they’re confirmed fraud or simple cardholder confusion — continues to grow. Every disputed payment takes the consumer’s bank an average of 2.5 phone calls to resolve, plus the time and expense of documentation and follow-ups. About 60% of payment disputes escalate and become chargebacks, the often lengthy dispute process that poses a heavy operational, financial and time burden across the payments ecosystem — from the merchant to their bank to the consumer’s bank to the consumers themselves. Global chargeback volume is projected to reach 324 million by 2028, reflecting increased stress to everyone involved.

Other hidden costs and friction points crop up throughout the process. A consumer’s bank risks alienating its customers when its disputes can’t be resolved easily. Merchants face losing the full value of chargebacks plus fees and expenses. Their banks, called acquirers, must maintain acceptable chargeback levels to remain in the good graces of payments networks. Nevertheless, all three parties have long treated disputes and chargebacks as an unavoidable cost of doing business.

One way to reduce the strain is by moving the disputes upstream, before they harden into chargebacks at all. That’s the crux of Ethoca Alerts, a fraud dispute management tool that uses real-time signals to notify merchants when an issuer has confirmed fraud or received a cardholder dispute. That gives the merchant a window of time to pause fulfillment and issue a refund when appropriate, before the dispute escalates. 

When a consumer disputes a charge directly with a merchant, it provides more opportunity to reach a resolution without triggering a chargeback, sometimes without involving the issuer at all. But this scenario is not always the most feasible or convenient for consumers, who often struggle to get through to busy customer service lines. Banks and credit unions have generally made it easier for their customers to talk to a human, so disputes are most often initiated with the issuing bank.

Fiserv, the global financial technology firm that enables the movement of money between businesses and consumers, has integrated Ethoca Alerts into its Dispute Expert platform for issuers and Dispute Alerts solution for merchants, helping mitigate the impact of chargebacks on its customers’ bottom lines.

“For issuers, we’re really focused on reducing friction with faster outcomes and less manual intervention,” says Erik Wichita, head of Card Services at Fiserv. With Ethoca Alerts, Fiserv can enable merchants to respond in minutes or hours to provide the refund when it’s most salient.

“That reduces unnecessary chargebacks, lowers costs for all constituents and helps us provide a better cardholder experience,” Wichita explains. “It really puts cardholders at ease in terms of the relationship they have with their issuing institution.”

Ethoca provides the fastest way to notify a merchant or acquirer that something’s gone wrong and a dispute is underway. Of the alerts resolved by merchants stemming from a Fiserv issuer dispute, 80% were resolved in less than 24 hours, preventing the chargeback entirely.

Brandy Wood, head of Client Experience Product at Fiserv, points out that the importance of reducing chargebacks on the merchant side runs deeper than mitigating operational expense. “Excessive chargebacks can trigger scrutiny from the card networks and put merchants at risk to having payment acceptance disrupted,” she says. “Reducing the number of disputes that become chargebacks is critical for merchants, because prevention is far more effective for them than remediation.”

And that can be important even for business survival, depending on the size of the operation and the type of product and service it offers. For example, a big-box retailer that absorbs the cost of a chargeback for a big-screen TV obviously takes a hit for the purchase price. But a small business, like your local floral shop or an artist with an Etsy store, could see their profitability shift to red for the week with the escalation of a single chargeback.

On the merchant side, the timely resolution of a dispute often means they are saving hard dollars. If a merchant is alerted to a dispute while a transaction is still pending, they can usually stop a shipment before they send it. That saves merchants the full value of the order, plus any chargeback-related fees and operational costs they can ultimately avoid.

Merchants and acquirers also report that they are better able to sidestep losses from low-dollar-value disputed transactions, which previously were more efficient to write off than to challenge. And the time and cost savings from resolving hundreds or thousands of those small disputes make a real impact over time.

Avoiding dispute-related dings will become a superpower as commerce continues to take on new forms, including the rise of agentic commerce. “As more people start to use agents to make purchases, it could create more customer confusion. And whenever a customer is confused and doesn’t recognize a transaction, that’s what turns into a dispute or chargeback,” Fuller says.

Having the tools and systems in place to mitigate that friction before it occurs will prove invaluable as global commerce grows more complex.

Wood says that some of Fiserv’s merchants and acquirers are also leveraging insights gleaned from the resolution process to protect themselves from future fraud. By integrating dispute-related signals into their fraud monitoring systems, acquiring banks can start proactively declining transactions that have the highest potential for fraud, strengthening chargeback prevention.

“As disputed transactions and broader fraud vectors continue to be real in our world,” Wichita says, “we’re proving that speed, responsiveness and consistency matter the most.”