The more things change, the more they stay the same. When it comes to chargebacks, the rules, processes, risks, and opportunities are constantly evolving. Chargebacks are a major threat and even if your business has a strong grasp on them right now, future developments could undermine your efforts or otherwise increase risks.
Given this, it’s crucial for merchants to continually monitor developments and emerging risks. That’s why we’re going to take a deeper look at the chargeback process in 2025. While we’ll cover many of the most important developments, this analysis is far from exhaustive.
The Threat Posed by Chargebacks is on the Rise
Before jumping into the specifics of the chargeback process, it’s crucial to understand the current environment. Chargebacks have been on the rise in recent years and this trend will likely continue through the near future.
Among other things, cybercrime is becoming more common as criminals use increasingly sophisticated tools, including Artificial Intelligence. Unfortunately, cybercrime can fuel chargebacks when fraudsters use stolen credit cards and other data to make unauthorized purchases and otherwise perpetuate crime.
A report by Mastercard’s Ethoca projects chargebacks to rise 40% from 2023 to 2026. Merchant surveys and other data sources likewise suggest that chargebacks are on the rise. This makes it all the more important for merchants to monitor developments and proactively manage and combat chargebacks and fraud.
The Chargeback Process in 2025
The basic process for chargebacks remains the same. We’ll cover the steps below but keep in mind that the actual process can vary depending on the card network and financial institutions involved. Further, the tools used by various parties may also impact the process.
The Pre-Dispute Stage
The chargeback process normally kicks off when a cardholder contacts their bank and requests to file a chargeback. In some cases, there will be a pre-dispute stage before the chargeback is filed.
Banks, card networks, and merchants all want to avoid chargebacks as they are a hassle and can consume a lot of resources. Increasingly, stakeholders are turning to various tools and solutions designed to prevent chargebacks altogether.
During the pre-dispute phase, some banks and card networks may first contact the merchant to gather information. Information and data sharing tools, such as Ethoca’s Consumer Clarity and Verifi’s Order Insight provide detailed transaction details and can be quite effective at reducing confusion. This may head off a chargeback.
Further, if the relevant stakeholders have signed up for chargeback alerts services, the merchant may first be notified of an impending chargeback. This affords the merchant an opportunity to resolve the issue without having to go through the chargeback representment process.
Chargeback Representment in 2025
Chargeback representment will remain a fact of life for many merchants in 2025. This process allows merchants to fight chargebacks and prove that a transaction was legitimate.
Step 1- If the dispute is not resolved in the pre-dispute phase, a chargeback will be filed.
Step 2- The issuing bank will contact the merchant’s acquiring bank to notify them of the chargeback. A reason code is provided to explain why a chargeback was filed. With credit card transactions, funds will be taken from the merchant on a provisional basis and the cardholder will get a credit. With debit card transactions, the merchant doesn’t immediately lose money and the cardholder does not immediately get their funds returned.
Step 3- The acquiring bank will pass along the pertinent information, including the chargeback reason code. The merchant will then decide whether to accept or fight the chargeback. If the merchant accepts the chargeback, the process comes to a halt.
Step 4- If the merchant decides to fight the chargeback, they will draft and submit a chargeback rebuttal letter in which they will argue that the chargeback is not legitimate. Crucially, evidence will be provided and may include shipping receipts, communication with the customer, login records, and IP addresses (among other things). The customer may also submit evidence to back up their claim.
Step 5- The issuing bank will review the merchant’s chargeback rebuttal letter as well as information provided by the cardholder, and then decide whether or not to approve the chargeback. If approved, the merchant will lose funds and the customer will get their money back
Step 6- The losing party may opt for a second representment. This essentially means the whole process starts over. In order to win the second representment, the filing party will typically need to provide new, compelling evidence.
Step 7- After the second representment, the losing party may request arbitration. If so, the card network will step in, examine the dispute, and make a final ruling. The losing party will have to pay the arbitration fees, which can cost hundreds of dollars.
Please note: American Express typically acts as both the issuer and card network. For this reason, there may be no arbitration phase, as the card network has already made a ruling.
Visa is Re-VAMPing Chargeback Thresholds
It’s especially crucial for merchants to keep an eye on their chargeback ratio. If your ratio gets too high, meaning you’re suffering high levels of chargebacks, card networks and other financial institutions may hit you with penalties. These ratios can fluctuate as companies change their policies, and in 2025 and 2026, Visa is instituting some major changes.
Visa’s fraud monitoring program (VFMP) and Visa’s dispute monitoring program (VDMP) program are being combined under a new Visa Acquirer Monitoring Program (VAMP). VAMP will set new thresholds that are in some ways not as forgiving as in the past. However, VAMP will streamline programs, perhaps making them easier for merchants to engage with. We cover the details here.
Keep in mind that the fees charged by banks and card networks typically cost upward of $50 per transaction and add up quickly. ChargebackHelp offers low-cost solutions that can help you save on fees and other penalties.
Make 2025 a Year of Success
Card networks, banks, and other stakeholders are working diligently to reduce chargebacks. In some cases, these changes could increase risks and create complications for merchants. In the long run, however, efforts to reduce chargebacks could also benefit merchants.
If you need assistance with chargebacks and the ever-changing business environment, reach out to the ChargebackHelp team. We closely monitor developments and are always ready to help our clients. 2025 may bring some challenges but will also present opportunities.