What are SaaS Chargebacks?

Chargebacks are when a customer receives their money back following a dispute. There could be two situations: unauthorized or fraudulent transactions and legitimate payments for the service.

The customer can trigger a resolution process. Some reasons, such as satisfaction, can contribute. In other cases, customers can receive their money back if they made the wrong payment or were fraudulently charged.

It’s important to distinguish between chargebacks and refunds. Refunds are typically triggered by the merchant. 

Chargebacks normally follow a similar process. 

1. The customer files a dispute with their bank/card provider; this may happen if they claim they are not receiving their products/services or state that another individual used their cards. The customer normally has to file evidence. 
2. The bank investigates the chargeback request; this can take several working days. 
3. After investigating, the bank decides whether they’ll issue the chargeback; if so, the payment comes from the merchant account.

Small differences might occur between different banks/networks, but for the most part, the process is almost identical. The right to appeal a chargeback granted by the bank is still there. Many payment providers have resolution centers for these kinds of disputes. Learn more about how chargebacks work in our guide on how to win chargebacks. 

Chargebacks can arise from both valid claims and other kinds of activity. Chargebacks can be triggered by customers who perceive unauthorized or fraudulent activity on their accounts. 

In case of non-receipt of items, customers may have the option to request a chargeback. It’s possible for customers to request chargebacks when they aren’t happy with their product, though the frequency may differ depending on various factors.

Paying for subscriptions no longer used could also be a factor; make sure that you only pay for subscriptions that are active. Normally, customers file a claim within 2-3 months. 

Chargeback prevention is about more than just losing money; it’s also important that you keep your reputation. Ways to avoid chargebacks include: 

• Communicating with customers
• Identifying challenges in advance
• Being transparent with product descriptions and avoiding false language

Since chargebacks are sometimes the result of fraudulent transactions, it’s a good idea to implement systems that can spot such problems. Being proactive is essential from the get-go.

Two types of chargeback exist: Fraud-related and non-fraud-related. Some examples are: 

• A user’s credit card being charged twice for a subscription or product order (non-fraud-related)
• A product not being delivered (non-fraud-related)
• Card payments that the user does not recognize (fraud-related)
• A faulty or different product being delivered (non-fraud-related)