What is Payment gateway?

Chargeback: A demand by a credit-card provider for a retailer to make good the loss on a fraudulent or disputed transaction.

Introduction: A chargeback occurs when a credit card holder disputes a charge on their statement and requests a refund directly from the card issuer. Originating as a consumer protection mechanism, chargebacks protect customers from unauthorized transactions and unsatisfactory purchases. However, for businesses, they can represent a significant challenge, leading to lost revenue, additional fees, and potential damage to their reputation.

Reasons for Chargebacks:

  • Unauthorized Use: Transactions made without the cardholder's consent, often due to stolen or lost credit cards.
  • Non-Delivery: The customer claims the purchased goods or services were never received.
  • Quality Issues: The product or service received did not meet the customer’s expectations or was significantly different from the description.
  • Clerical Errors: Duplicate billing, incorrect amounts charged, or refunds not processed properly.

Implications for Businesses:

  • Financial Loss: Besides losing the sale, businesses may incur chargeback fees and, in severe cases, increased payment processing rates.
  • Operational Disruption: Addressing chargebacks requires time and resources, diverting attention from core business activities.
  • Reputational Risk: High rates of chargebacks can lead to scrutiny from payment processors and diminish consumer trust.

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