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Playbook: Reduce Chargebacks Fast

TL;DR
  • Week 1: Talk to 10 customers who disputed—understand the root cause before fixing anything
  • Week 2: Test ONE hypothesis (descriptor? shipping? subscription confusion? fraud?)
  • Week 3-4: Deploy alert services (Verifi, Ethoca), measure results
  • Emergency: Proactively refund questionable orders, restrict high-risk products, manual review
  • Exit criteria: Under 0.9% for 3 consecutive months (Visa), under 1.5% AND under 100 chargebacks (Mastercard ECM)

Rapid chargeback reduction when approaching network thresholds.

Throwing tools at chargebacks without understanding the cause is expensive guessing. This playbook is structured as hypothesis-test-learn, not a checklist to blindly follow.

Workflow Overview​

PhaseKey Tasks
UnderstandTalk to 10 customers who disputed, classify disputes by root cause
Quick WinsPick ONE hypothesis, set success metric, run test
Deploy AlertsEnroll in Verifi/Ethoca, test alert workflow
MeasureCheck if fix worked, expand or kill based on data
Prerequisites

Before starting, ensure you have:

When to Use This Playbook​

  • Chargeback ratio approaching 0.9% (Visa) or 1.5% (Mastercard ECM)
  • Already in a monitoring program
  • Received network warning letter
  • Significant month-over-month increase

First: Understand Why​

Before you do anything else, talk to 10 customers who disputed.

Questions to ask (fact-seeking, not opinion-seeking):

  • "What were you trying to do when you made this purchase?"
  • "What did you expect to see on your statement?"
  • "What did you do when you first noticed the problem?"
  • "Did you contact us before disputing?"

What you'll learn:

  • Descriptor confusion (they didn't recognize the charge)
  • Shipping problems (never arrived, took too long)
  • Product issues (not as described, defective)
  • Subscription confusion (forgot they signed up, couldn't cancel)
  • Actual fraud (they really didn't make the purchase)
  • Friendly fraud (they did make it, they're lying)

5-10 conversations will tell you whether you have a representment problem or a root cause problem. Usually it's root cause.

Current Situation Assessment​

Current Month:
□ Transaction count: _______
□ Chargeback count: _______
□ Chargeback ratio: _______%

Top 3 Reason Codes:
1. _______ (count: ___)
2. _______ (count: ___)
3. _______ (count: ___)

Hypothesis: We think the main driver is _____________ because _____________.

Week 1: Quick Wins (Test One Thing)​

Pick ONE hypothesis from your customer conversations and test it.

If It's Descriptor Confusion​

Hypothesis: Customers don't recognize our billing name.

Test: Update descriptor to match your brand + add phone number.

Metric: Track "I don't recognize this charge" support contacts over 2 weeks.

Expected result: 20-30% reduction in recognition-related disputes.

If It's Shipping Problems​

Hypothesis: Customers dispute because they think it never arrived.

Test: Add proactive tracking emails (shipped, in transit, delivered).

Metric: Track 13.1/4855 "not received" chargebacks over 30 days.

Expected result: 30-50% reduction in not-received disputes.

If It's Subscription Confusion​

Hypothesis: Customers forget they subscribed or can't cancel.

Test: Send clearer renewal notices 7 days before charge + simplify cancellation to under 3 clicks.

Metric: Track 13.2/4853 "cancelled recurring" chargebacks over 30 days.

Expected result: 40-60% reduction in subscription disputes.

If It's Actual Fraud​

Hypothesis: We're approving too many fraudulent transactions.

Test: Enable 3DS on orders over $200 from new customers.

Metric: Track 10.4/4837 fraud chargebacks AND auth rate over 2 weeks.

Guardrail: Auth rate can't drop more than 5%.

Expected result: 30-50% reduction in fraud chargebacks on that segment.

Week 2: Deploy Alerts​

Enroll in network alert programs to stop disputes before they become chargebacks:

□ Visa Verifi (formerly VROL/RDR)
□ Mastercard Collaboration (Ethoca)
□ Verify alert response workflow
□ Test that alerts are being actioned within SLA

Alerts are a tax on bad customer experience. They buy you time, but the root cause still needs fixing.

Week 3-4: Measure and Iterate​

Did Your Hypothesis Hold?​

HypothesisExpected ResultActual ResultNext Step
Descriptor confusion-20% recognition issues___%Keep / Adjust / Kill
Shipping problems-30% not-received___%Keep / Adjust / Kill
Subscription confusion-40% cancelled recurring___%Keep / Adjust / Kill
Actual fraud-30% fraud CB___%Keep / Adjust / Kill

If It Didn't Work​

  • Was your sample size large enough? (Need 30+ days for CB data)
  • Was your hypothesis wrong? (Talk to more customers)
  • Did you test the wrong segment? (Try different population)
  • Did something else change? (Isolate variables)

If It Worked​

  • Can you expand the change?
  • What's the next biggest driver?
  • Document what worked for future reference

Emergency Measures​

If threshold is imminent and you need to buy time:

□ Proactively refund anything questionable (cheaper than CB + fee)
□ Temporarily restrict high-risk product categories
□ Manual review ALL orders (temporary, not sustainable)
□ Contact network rep to discuss situation
These Are Band-Aids

Emergency measures buy time. They don't fix root causes. If you're still doing manual review on all orders after 30 days, you haven't solved the problem.

Chargeback Ratio Math​

Understand the denominator:

Ratio = Chargebacks (current month) / Transactions (prior month*)
*Network-specific timing - verify with your processor

Reducing the numerator:

  • Prevent chargebacks (fraud controls, better CX)
  • Deflect to refunds (alerts, customer service)
  • Resolve disputes pre-chargeback

Managing the denominator:

  • Maintain transaction volume
  • Don't artificially inflate with low-value transactions (networks notice)

Exit Criteria​

Visa VDMP Exit​

□ Below 0.9% for 3 consecutive months
□ AND below 100 chargebacks per month

Mastercard ECM Exit​

□ Below 1.0% for 3 consecutive months
□ OR meet specific program requirements

Post-Crisis: What to Keep​

Every chargeback crisis is an expensive lesson. Don't waste it.

Document:

  • What was the root cause?
  • What test worked?
  • What should you keep doing?
  • What would have caught this earlier?

Permanent changes:

  • If descriptor change worked, keep it
  • If alerts are deflecting disputes, keep them
  • If 3DS on high-risk worked, keep it
  • If proactive shipping emails worked, keep them

First Experiment to Run This Week​

If you're reading this and your ratio is above 0.7%:

Hypothesis: We don't actually know why customers are disputing.

Experiment: Call 5 customers who disputed in the last 30 days. Ask what happened.

Time: 2 hours

Expected outcome: You'll know whether you have a fraud problem, a CX problem, or a product problem. Then you can pick the right fix.

Next Steps​

Crisis under control?

  1. Chargeback Metrics - Set up ongoing monitoring
  2. Prevention Overview - Long-term prevention strategy
  3. Alert Services - Optimize your alert setup

Still in trouble?

  1. Zero Point Nine Panic - Emergency actions
  2. Network Programs - Understand the monitoring program
  3. Compelling Evidence - Win more fights

Need to understand why?

  1. Friendly Fraud - When customers lie
  2. Descriptors and Comms - Fix recognition issues