The primary aim of this article is to provide readers with an understanding of chargeback fraud and its system. This knowledge will help us to be aware of our surroundings and protect ourselves and our loved ones from falling prey to it.

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Chargeback fraud occurs when someone buys goods or services from an online store, receives them, but then requests a refund from their bank or credit card company. This is dishonest and fraudulent behaviour. The card company will refund the money to the cardholder, but then ask the retailer for compensation. If this type of fraud is connected to other bad online activities like Account Takeover Fraud (ATO), the business might have to pay additional chargeback fees. However, accurate bots and online protection can help prevent these types of fraud.


Credit Card Chargebacks were created to protect the interests of consumers. When a customer initiates a dispute, they receive an immediate refund, and an investigation takes place where relevant evidence is provided. If the card issuer supports the cardholder, then the merchant must issue a refund. If the situation is the other way around, the charge will be put back to the fraudster’s card. There are two types of fraud: Friendly Fraud and Account Takeover Fraud (ATO).

  1. Friendly Fraud occurs when the fraudster purchases goods with their card and then files a chargeback after receiving them.
  2. ATO fraud occurs when the fraudster uses someone else’s account and details to make a purchase.


When your business receives any notification of chargeback by the bank or card company requesting a refund then your organization needs to investigate to determine if the chargeback is false. Some of the techniques you can use to reduce chargebacks resulting from friendly fraud and automated attacks are as follows:

  • Use a bot and fraud prevention software
  • Have the necessary CVV numbers for each transaction
  • Keep well-protected detailed records of transaction
  • Look for red flags like data inconsistencies and unusual locations or behaviors
  • Stay up to date on recent practices for preventing chargeback fraud


Data Dome Services strongly believes that bot protection is primary in online fraud cases as fraudsters require bots to scale and distribute their attacks against businesses. Stopping bots from entering the user’s website, mobile app, or API can prevent ATOs and diminish the chances of Chargeback fraud. In recent times Data Dome has reduced ATO events by 99 percent and has decreased Mastercard declines by 95.5 percent for a large US-based hotel customer within a time span of 90 days. Data Dome’s bot and software prevent automated threats, including fraud using stolen cardholder credentials, on websites, mobile apps, and APIs. Their solution performs real-time request analysis at the edge with a verification process that takes only two milliseconds, ensuring a seamless user experience.