Chargebacks cost LATAM merchants almost 20% of eCommerce revenue: What they are & why they matter

A chargeback is a payment reversal initiated by a bank after a customer disputes a transaction. Unlike merchant-issued refunds, chargebacks remove funds from the merchant's account during investigation. Consequently, the merchant risks losing the payment, the product, shipping costs, and a processing fee.

Initially designed to protect consumers, the system is increasingly used to dispute legitimate purchases, a practice known as friendly fraud. When customers claim valid transactions are unauthorized or undelivered, merchants must provide evidence through the payment network's dispute process.

Latin America is particularly vulnerable as digital payment growth outpaces the development of fraud prevention and dispute resolution infrastructure.

A survey by MRC, Cybersource, and Verifi indicates chargebacks affect 3.7% of regional orders, with merchants spending 19% of annual eCommerce revenue managing fraud. Americas Market Intelligence estimates that friendly fraud represents up to half of all chargeback requests.

Brazil illustrates this risk: the Pix instant-payment system handled over 42 billion transactions in 2024, yet 71% of the country's fraudulent transactions occur via Pix. ScamWatchHQ reports that mobile scams and payment fraud cost roughly R$186 billion between July 2023 and July 2024.

The Regulators' Response

Brazil's Central Bank introduced the Pix Special Refund Mechanism, or MED, to give fraud victims a structured process for requesting reversals. New rules limit Pix transactions from unrecognized devices. Chile has criminalized fraudulent payment disputes, and Peru requires two-factor authentication for card transactions.

These measures address critical points in the payment chain: recourse after fraud, device controls, deterrence against abuse, and robust authentication. They point toward a system with clearer accountability and stronger safeguards for all stakeholders.

However, the regulatory landscape remains uneven. Rules vary by country, payment method, and network, making it difficult for merchants to determine requirements through checkout design alone or control how external entities evaluate disputes.

The region is gradually shifting from a reactive, card-centric model toward a layered approach combining real-time controls and local infrastructure. Yet, the transition is incomplete, leaving merchants without consistent cross-border visibility.

Emerging markets like India offer reference points; its UPI system integrates device binding, 2FA, and machine-learning monitoring at scale. This illustrates the necessary direction: fraud prevention and dispute resolution must be designed into the payment infrastructure from the start, and thus prevent cumbersome bureaucratic procedures, as well as the loss of time and money for merchants.

What Operators Are Doing

Payment service providers and orchestration partners offer the infrastructure merchants often lack, including local acquiring connections, real-time transaction analysis, 3DS authentication, and structured dispute workflows for diverse markets.

Effective fraud prevention relies on data-driven signals. Operators analyze device info, IP addresses, and behavior to identify suspicious patterns and mitigate risks before transactions are disputed.

For card payments, 3DS adds critical authentication. When successful, it can shift liability for certain chargebacks to the card issuer, providing an essential layer of protection.

Operators also streamline the dispute process by organizing records and reason codes, allowing merchants to submit evidence to issuing banks within strict network deadlines.

Ultimately, merchants cannot handle chargebacks alone. While they can improve internal controls, they rely on partners to navigate card-network rules and provide the infrastructure needed to operate effectively in Latin America.

What Merchants Can Do

For merchants, the key lesson is that chargebacks are not only a fraud problem. They are also a local infrastructure problem. A stronger strategy includes:

• Working with providers that have local licenses, acquiring relationships, and dispute teams.
• Capturing delivery confirmations, device information, IP data, and customer communications when the purchase happens.
• Monitoring unusual velocity, such as multiple high-value orders in a short period.
• Offering local payment methods, including account-to-account and instant-payment options, alongside cards.

In Latin America, understanding how local payment systems work is essential to reducing losses and defending legitimate sales.

Merchants should treat dispute management as an operating process, rather than an occasional customer-service task. This involves assigning ownership, setting internal deadlines, mapping evidence for reason codes, and reviewing outcomes across markets, issuers, and payment methods. The goal is to prevent recurring disputes, not just contest them.

Diversifying payment methods requires similar discipline. While account-to-account and instant payments reduce reliance on card chargebacks, they are not dispute-free; each method involves unique refund, reversal, and reconciliation rules. Before expansion, merchants must clearly understand who owns the customer communication and how funds are handled.

Successfully navigating Latin America's chargebacks landscape requires integrating merchant-level discipline with the infrastructure provided by payment operators and the ongoing development of regional regulatory safeguards. This combination is essential for reducing losses and defending legitimate sales.