{{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 hedge ...

product that protects a merchant who accepts credit cards. The insurance protects the merchant against fraud 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 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 markets. Because ...

. The phrase chargeback insurance is also sometimes used to describe the guarantee provided by online fraud prevention companies such as Vesta, ClearSale,

Forter Forter is a software as a service (SaaS) company that provides fraud prevention technology for online retailers and marketplaces. It has offices in Tel Aviv, London, Singapore, and New York; its headquarters are in New York. History The company ...

, 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 A payment card number, primary account number (PAN), or simply a card number, is the card identifier found on payment cards, such as credit cards and debit cards, as well as stored-value cards, gift cards and other similar cards. In some situati ...

generators or counterfeit plastic cards * 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 down ...

payment gateway A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The ...

. 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