Much of the payments industry’s chargeback conversation focuses on ecommerce. That attention is understandable, as card-not-present transactions carry higher fraud exposure and involve growing digital volumes and increasingly complex authentication environments. But this focus has created a blind spot: Card-Present Chargebacks. In this part one of a blog series on card-present chargebacks, we will provide a brief on chargebacks, why card-present chargebacks are becoming a concern for merchants, and how reason codes hold the key to clarity.

A Brief on Chargebacks

A chargeback occurs when a cardholder disputes a transaction through their issuing bank, triggering the provisional removal of funds from the merchant while the claim is investigated. The merchant may accept the dispute or contest it through representment, with potential escalation to pre-arbitration and arbitration if the issuer maintains the cardholder’s position. The process is structured, time-bound, and economically consequential — not only through fees, but through operational effort and exposure to monitoring thresholds.

Chargebacks can lead to additional cost (fees, labor, time, resources, etc.) for all parties involved. Aligning with how disputes are being classified creates confidence throughout the payment supply chain.

Why Card-Present Chargebacks Deserve Attention

While EMV authentication significantly improved traditional card-present transaction security, it also changed how fraud liability is allocated across the ecosystem. The EMV liability shift in 2015 caused all liability for EMV (chip, and later, tap) transactions to be moved to the issuing bank for fraud-related chargebacks. If the transaction “falls back” to using the mag stripe or manual entry of card information, the merchant would still be liable. As a result, merchants have grown to bear a greater share of the operational and financial consequences when disputes arise as the Federal Reserve data shows below. Card-present chargebacks in particular have become a growing concern for many merchants. Most merchants see minimal card-present fraud, which signifies either EMV technology’s effectiveness or potentially a misclassification of card-present chargebacks. For merchants with significant in-store volumes, it is important to understand how fraud chargebacks are being classified.

Chargeback Reason Codes

Chargeback reason codes are crucial in allowing all parties to know what issue was raised and what solution would both remedy the current problem and future relevant disputes. Though fraud remains a material driver for chargebacks in ecommerce environments, not all chargebacks are fraud. Disputes can stem from true unauthorized activity, but also from non-receipt claims, subscription misunderstandings, return friction, billing opacity, or simple non-recognition of a descriptor. Treating every dispute spike as a fraud failure risks misdiagnosing the root cause.

This distinction becomes particularly relevant in card-present environments. For example, a card-present merchant operating in an EMV environment should not routinely see “item not received” reason codes tied to in-store transactions. When such mismatches occur, they often signal friendly fraud behavior, evidence submission gaps, or internal reporting issues, and not necessarily deficiencies in fraud strategy. Without segmentation and cross-functional visibility, these patterns remain buried inside blended dispute ratios.

An increase in consumer awareness regarding how easy it is to commit first-party, or friendly, fraud has led to an increase in card-present chargeback claims filed accompanied by vague reason codes. Merchants are seeing a shift away from the usual “fraud” classified chargebacks to less clear, but just as fraudulent, chargeback reason codes for card-present transactions.

Conclusion

Chargebacks are not inherently fraudulent; however, without strong verification of chargeback claims, friendly fraud can become a mounting issue merchants must overcome. In part two of this series, we will discuss the trade-offs in optimizing payment and fraud strategies and outline an approach to mitigate card-present chargebacks for merchants.