How UK Merchants Can Reduce Chargebacks and Stop Online Payment Fraud

Editorial Staff
Sep 6
3 min read

Chargebacks are a real problem for UK merchants. When customers dispute payments, the money is pulled from your account and sent back to them. If it happens often, it costs you more than just revenue; you pay extra fees and risk damaging your merchant account.

Fraud makes this worse. When someone uses a stolen card or falsely claims a refund, the business suffers. That’s why it is important to improve your fraud controls and follow proper payments compliance practices.

How UK Merchants Can Reduce Chargebacks and Stop Online Payment Fraud

Here’s how UK merchants can protect their business using secure payment options and better payment handling.

Understanding chargebacks and digital fraud

A chargeback occurs when a customer disputes a transaction with their card issuer. If the dispute is resolved in their favour, the funds are pulled back from the merchant.

Did you know?

Around 70 to 75% of chargebacks in card-not-present transactions are caused by friendly fraud, according to industry estimates.

Other common reasons for chargebacks include,

The card was used without permission
The customer says they never got the item
They do not recognise the charge
They forgot to cancel a subscription

Note

Some of these are genuine. But many are cases of fraud or simple misunderstandings.

Why are UK businesses seeing more fraud?

Online shopping is growing fast. And so are fraud attempts.

And guess what? Criminals often target small businesses because their systems are easier to exploit. Because of this, it is important to follow PCI compliance UK guidelines.

If your systems handle card data, you must meet strict standards. These rules are part of PCI DSS compliance UK. They help protect both the business and the customer.

Best practices to reduce chargebacks

Here are some simple ways to reduce chargebacks and avoid fraud.

Use strong customer authentication

SCA is now mandatory for many UK transactions under PSD2. It requires two or more forms of authentication, such as passwords, biometrics, or device validation.

So, make sure your payment gateway supports SCA for all eligible payments. This is a core part of the PCI DSS compliance UK requirements.

Choose secure payment options

Choose payment tools that support fraud checks.

You can use tools like:

Card code checks
Address verification
Two-factor authentication
IP and device tracking

These tools block high-risk payments before they go through. That helps prevent fraud before it reaches your account.

Keep records and proof

Maintain detailed transaction logs and communication records. These are important if you need to challenge a chargeback with evidence. Well-documented policies and prompt customer support can also prevent disputes from turning into chargebacks.

Monitor and analyse transactions

Monitoring systems help detect fraud early. It also supports your payments compliance by keeping audit trails ready for inspection.

Here are some red flags you must watch out for –

Large orders from new users
Multiple failed payment attempts
Billing and shipping addresses that don’t match

Use tools that alert you to suspicious activity. This supports payments compliance and helps you stop fraud early.

How PCI compliance helps reduce risk

PCI compliance is not just a box to tick. It helps protect card data and lowers your risk of breaches and chargebacks. UK businesses must follow PCI compliance UK rules if they store or process payment data.

Steps include the following:

1. Encrypting cardholder data

2. Limiting who can access payment systems

3. Using strong passwords and software updates

4. Running security checks and scans

These steps are all part of PCI DSS compliance UK and they help build trust with customers.