{{More citations needed, date=December 2008Chargeback insurance is an

insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...

product that protects a

merchant A merchant is a person who trades in goods produced by other people, especially one who trades with foreign countries. Merchants have been known for as long as humans have engaged in trade and commerce. Merchants and merchant networks operated i ...

who accepts credit cards. The insurance protects the merchant against

fraud In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...

in a transaction where the use of the credit card was unauthorized, and covers claims arising out of the merchant's liability to the service

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

. The phrase chargeback insurance is also sometimes used to describe the guarantee provided by online fraud prevention companies such as Vesta, ClearSale, Forter, Riskified and Signifyd. Unlike with card present transactions, where the merchant is not liable for the cost of fraudulent transactions (unless they do not meet technological security requirements such as EMV), merchants are liable for card not present transactions which turn out to be fraudulent. For this reason, online fraud prevention companies who offer decisions (meaning, they provide an approve or decline decision for orders) rather than scores (where the merchant must themselves decide whether to approve or decline) sometimes offer to cover the cost of the chargeback, since the chargeback would not have occurred had their decision not been incorrect. This form of chargeback insurance, more properly called a chargeback guarantee, will typically cover all losses of the relevant type, not only through one gateway or processor.

Coverage model

Coverage can apply under a number of circumstances, including: * The illicit use of a lost or stolen credit card before the loss or theft is reported by the cardholder. * The use of credit card number generators or counterfeit

plastic card Plastic cards usually serve as identity documents, thus providing authentication. In combination with other assets that complement the data stored on the card, like Personal identification number, PIN numbers, they also serve authorization purpose ...

s * Post-purchase changes to "ship to" information * Signature mismatch or signature not on file. A merchant claiming under a chargeback insurance policy may be reimbursed for: * The cost of a stolen product or service * The loss of profit A typical chargeback insurance policy will only cover losses on credit card transactions purchased through its own specific

payment processor A payment processor is a system that enables financial transactions, commonly employed by a merchant, to handle transactions with customers from various channels such as credit cards and debit cards or bank accounts. They are usually broken do ...

or payment gateway. While chargeback insurance can help cover losses, like any insurance there are pros and cons. While some fraud protection services charge a flat-rate fee per transaction (typically 0.5 to 15 cents per transaction), vendors who offer chargeback insurance usually charge a percentage-based fee of 0.5% to 1.5% which can be cost-prohibitive for higher-dollar transactions.

Coverage model

See also