Lost Chargebacks KPI

Lost Chargebacks

The Lost Chargebacks KPI tracks the percentage of chargeback disputes that a merchant is unable to win during the representment process, resulting in the permanent loss of the disputed transaction funds. It is calculated as: (Number of Lost Chargebacks / Total Chargebacks Received) x 100 for a specific period, typically monthly. For example, if a merchant receives 100 chargebacks and loses 70, the lost chargebacks rate is 70%. This metric highlights the financial and operational impact of unsuccessful dispute resolutions, where the issuing bank upholds the cardholder’s claim, and the merchant forfeits the transaction amount, incurs chargeback fees (e.g., $20 per claim with PayPal), and often loses the cost of goods or services already delivered.

For merchants, a high lost chargebacks rate signals inefficiencies in dispute management, such as weak evidence submission or failure to address root causes like friendly fraud, which accounts for 60-86% of chargebacks. Beyond financial losses—potentially costing up to 350% of the transaction value due to fees, shipping, and acquisition costs—lost chargebacks increase the overall chargeback ratio, risking penalties, higher processing fees, or account termination if thresholds (e.g., 1% for Visa/Mastercard) are breached. Reputationally, customers may perceive merchants as untrustworthy if disputes are mishandled, reducing trust and future sales. For issuers, a high lost chargebacks rate may indicate merchant vulnerabilities, prompting stricter scrutiny.