How to Reduce Chargebacks in Your Business
It’s a scenario every business owner dreads. You check your bank balance or your settlement report, and it’s lighter than expected. You dig into the details and find a transaction from three weeks ago has been reversed.
The money is gone. The stock you sold is gone. And to add insult to injury, you’ve been hit with a £15 or £20 administrative fee from the bank.
This is a chargeback. Unlike a refund, which takes place between you and the customer, a chargeback is a forced reversal initiated by the customer’s bank. In the current economic climate, where every margin matters, they are a leak in your revenue bucket that you simply cannot afford.
For UK hospitality and retail businesses, the threat is rising. Whether it’s genuine criminal fraud or the growing trend of "friendly fraud" (where a customer disputes a valid payment), you need a strategy to stop them.
Here is how to protect your business, reduce your risk ratio, and keep your hard-earned cash.
The Real Cost of a Dispute
Many merchants assume a chargeback just means losing the sale value. If only it were that simple. The true cost is often 2.5 to 3 times the original transaction amount.
When a chargeback hits, you lose:
The Revenue: The funds are immediately withdrawn from your merchant account.
The Goods/Service: You have already poured the pint or sold the jumper. That stock is gone.
The Admin Fee: Banks charge a non-refundable fee for processing the dispute, typically between £15 and £25 per instance.
Your Reputation: If your chargeback ratio (the percentage of sales that get disputed) breaches 0.9% or 1%, card schemes like Visa and Mastercard can place you on "excessive monitoring programmes." These come with massive fines and can even lead to your merchant account being terminated.
Why Do Chargebacks Happen? (The "Big Three")
To stop them, you have to know where they come from. Generally, they fall into three buckets.
1. Criminal Fraud (Third-Party Fraud)
This is when a thief uses a stolen card to buy goods from you. The real cardholder notices the transaction on their statement and tells their bank, "I didn't buy this." The bank reverses the money, and because you accepted a stolen card, you are often liable.
Risk Level: High for high-value retail; lower for pubs (thieves prefer resaleable goods).
Fix: avoiding payment scams requires strict staff training and secure hardware.
2. Merchant Error
These are self-inflicted wounds.
Processing a transaction twice by mistake.
Keying in the wrong amount (£50.00 instead of £5.00).
Forgetting to process a refund you promised.
3. Friendly Fraud (First-Party Fraud)
This is the fastest-growing category in the UK. "Friendly fraud" happens when a legitimate cardholder makes a purchase but later disputes it.
The Forgetful: "I don't recognise 'TEYA TRL 445' on my statement."
The Family Member: A child buys a game or a partner pays for dinner without telling the account holder.
The "Liar Buyer": A customer receives the goods but claims they didn't, or claims they were "defective" to get a refund without returning the item.
6 Practical Ways to Reduce Your Risk
You cannot stop every dispute, but you can build a fortress around your payments process that makes them much harder to file—and easier to win.
1. Master Your "Billing Descriptor"
This is the text that appears on your customer's bank statement. If your pub is called "The King's Head" but your legal entity is "J. Smith Holdings Ltd," your customer won't recognise the charge. They will panic and call their bank.
Action: Check your descriptor today. It should match your trading name and, if possible, include your town (e.g., "KINGS HEAD LEEDS"). Teya support can help you adjust this to be crystal clear.
2. Prioritise Chip & PIN and Contactless
The "Liability Shift" is your best friend. If you use a certified terminal to process a Chip & PIN or Contactless transaction, you are generally protected against claims of "I didn't authorise this."
Risk: If you swipe a card or key in the numbers manually (Card Not Present), you are almost always liable for fraud.
Action: Follow EMV chip card rules. Never force a magstripe swipe if a chip fails.
3. Use 3D Secure for Remote Payments
If you take orders over the phone for takeaways or deposits, do not ask customers to read their card numbers out loud. It is insecure and leaves you defenceless against disputes.
Action: Use Teya Payment Links. You send a secure link via SMS or email. The customer enters their details and must verify the payment via their banking app (3D Secure). This shifts the liability away from you.
4. Gather Evidence (Compelling Evidence)
If a customer disputes a sale, you have a limited window (usually 14-21 days) to fight back. You need proof.
Retail: Keep signed delivery receipts.
Hospitality: Ensure your EPOS tracks table numbers and timestamps.
General: Keep copies of any communication with the customer. If they emailed you praising the food before disputing the charge, that is gold dust.
5. Clear Refund Policies
Make it easy for customers to get a refund directly from you. If your policy is "No Refunds," customers will go straight to their bank to force one.
Action: Display your refund policy clearly at the till and on receipts. A £50 refund is cheaper than a £50 chargeback plus a £15 fee.
6. Stay Compliant
Security lapses lead to mass fraud events. Adhering to PCI compliance explained ensures you aren't leaving digital doors open for hackers to test stolen cards on your system.
How Teya Helps You Fight Back
We know that managing disputes is a headache you don't need. Teya’s ecosystem is built to minimise these risks automatically.
Real-Time Transaction Data: Our Business App gives you instant access to digital receipts and transaction history. When a dispute comes in, you can quickly find the transaction, see exactly when it happened, and download the proof you need to challenge it.
Secure Hardware: All Teya terminals are PCI-P2PE validated. We handle the security updates so your compliance is always current.
Transparent Support: If you receive a chargeback notification, we don't just pass on the bad news. Our UK-based support team can guide you on what evidence is required to represent the case and try to recover your funds.
Conclusion
Chargebacks are a part of doing business, but they shouldn't be a cost of doing business that you just accept. By modernising your payment methods, clarifying your billing data, and treating security as a priority, you can shut the door on fraudsters and keep your revenue where it belongs: in your account.
Don't let friendly fraud eat your margins. Partner with a payment provider that gives you the tools to stand your ground.
Ready to upgrade your payment security? Get started with Teya today
Team Teya
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2026. febr. 9.