Arbitration Rate KPI

Arbitration Rate

Arbitration Rate is a key performance indicator used to assess the efficiency of a merchant’s dispute management process. In the lifecycle of a payment dispute, arbitration is the final escalation stage, where the case is reviewed and settled by the card network after failed resolution attempts between the issuer and the acquirer.

This KPI is calculated as:

Arbitration Rate (%) = (Number of Arbitration Cases ÷ Total Number of Disputes) × 100

For example, if you had 10 arbitration cases out of 200 total disputes: (10 ÷ 200) × 100 = 5% Arbitration Rate

A high arbitration rate suggests that many disputes are not being resolved at earlier stages (e.g., chargeback response or pre-arbitration), which can lead to increased costs, time investment, and potential damage to the merchant’s reputation with payment processors. On the other hand, a low arbitration rate often indicates effective internal processes and strong dispute responses.

Monitoring the arbitration rate helps merchants optimize dispute handling, minimize financial risk, and maintain healthier relationships with acquiring banks and card networks.