The Three Primary Causes of Credit Card Chargebacks
“In cross-border credit card transactions, chargebacks remain one of the most persistent challenges for merchants. Chargebacks do not stem from a single cause; instead, they typically fall into three major categories: fraud-related chargebacks, commercial dispute chargebacks, and friendly fraud chargebacks. Among them, so-called “friendly fraud”—a euphemism for cardholder abuse—has become the dominant driver of chargeback volume worldwide.”
1. Fraud-Related Chargebacks: Gaps Exposed in a Technical Arms Race
Despite continuous advancements in payment security and risk control systems, fraudsters are evolving just as rapidly. The result is an ongoing arms race in which new attack methods constantly exploit emerging weaknesses.
1.1 The Evolution of Fraud Techniques
Organized fraud groups actively target mainstream risk-control mechanisms. Traditional tools such as device fingerprinting have seen declining effectiveness, as fraudsters now:
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Manipulate device characteristics to bypass fingerprint recognition;
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Rotate IP addresses to neutralize IP-based risk checks;
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Alter or delete cookies to erase behavioral traces.
1.2 Merchants’Risk-Control Dilemma
To maintain acceptable payment success rates, merchants often hesitate to implement overly strict controls. This necessary compromise leaves room for exploitation. Common stolen-card fraud methods include:
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Phishing attacks: Fake websites designed to capture card numbers and credentials;
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Malware infections: Malicious software embedded on devices to extract payment data;
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Magnetic stripe skimming: Illegal devices installed on ATMs or POS terminals to copy card data;
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RFID exploitation: Intercepting data from contactless cards using specialized equipment at close range.
1.3 Proportion of Total Chargebacks
Notably, chargebacks caused by genuine stolen-card fraud typically account for only 10%–20% of all chargebacks.
2. Commercial Dispute Chargebacks: Risks Embedded in Cross-Border Trade
International commerce spans multiple stages—procurement, production, customs clearance, and logistics. Any disruption along this chain can lead to transaction disputes and, ultimately, chargebacks. These cases usually originate from real transactional conflicts.
2.1 Common Risk Points in Cross-Border Transactions
Supplier non-performance, resulting in delayed or failed shipments;
Customs clearance issues caused by missing certificates or regulatory non-compliance;
Ambiguous agreements on customs duties, leading buyers to refuse delivery;
Cross-border logistics failures, including lost parcels, damaged goods, or excessive delays;
Significant discrepancies between delivered goods and product descriptions, such as size, color, or quality.
2.2 Cardholder Behavior Patterns
In theory, buyers should first attempt to resolve disputes directly with the merchant or platform. In practice, however, initiating a chargeback is often faster and simpler. As a result, many cardholders bypass merchant communication entirely and escalate disputes directly to their issuing banks.
2.3 Proportion of Total Chargebacks
Commercial dispute-related chargebacks typically represent 20%–30% of overall chargeback volume.
3. Friendly Fraud Chargebacks: The Largest Source of “Free Goods” Abuse
Friendly fraud is the most prevalent chargeback category, accounting for approximately 60%–70% of all cases. Its defining feature is that the card was not stolen; instead, the cardholder deliberately uses the chargeback mechanism to obtain goods without paying—effectively a concealed form of theft.
3.1 Structural Vulnerabilities in Cross-Border Transactions
In many cross-border chargeback cases, issuing banks do not require cardholders to return the goods. This creates a powerful incentive for abuse: cardholders can keep the product while reclaiming the funds.
To further obscure malicious intent, buyers often select chargeback reasons unrelated to their true motivation. Merchants lacking dispute experience struggle to provide decisive evidence and are frequently forced into unfavorable outcomes.
3.2 Four Core Motivations Behind Friendly Fraud
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Buyer’s remorse
Impulse purchases, price comparisons after checkout, or unauthorized purchases by family members—followed by chargebacks instead of refund requests. -
Circumventing refund policies
Many cross-border platforms enforce refund deadlines (e.g., 30–60 days after delivery). When buyers miss these windows, chargebacks become a convenient workaround. -
Deliberate “free-riding”
Transactions initiated with no intention to pay, followed by immediate chargebacks after delivery—constituting outright theft. -
Overprotection by issuing banks
Cardholders may forget a transaction and inquire with their bank. To protect customer experience, banks may classify the transaction as fraud and initiate a chargeback—even without malicious intent—leaving merchants to absorb the loss.