In 2025, chargebacks are still a recurring and increasing problem to merchants despite advancements in fraud and chargeback protection. The main issue is that traditional defenses are still lagging behind the development of first-party fraud, in which real customers fraudulently contest transactions. These disputes are costly and challenging to handle as they frequently have a low monetary value but occur in great volumes.
Through initiatives like the Visa Acquirer Monitoring Program (VAMP), card networks like Visa have strengthened enforcement in the face of these headwins. This program now considers both chargebacks and fraud reports when determining a merchant’s risk profile. This could mean that a merchant’s reputation might be raised to “high risk” even in cases where disagreements are settled amicably.
PayFacs, merchants and Payment Service Providers (PSPs) are all realizing that older approaches are no longer enough. It is now imperative for businesses to have a scalable, proactive chargeback prevention plan to deal with the impending penalties and the difficulties in detecting fraud.
The False Promise of Traditional Chargeback Prevention
Traditional chargeback prevention technologies, including manual reviews, basic fraud filters and reactive post-dispute workflows, are no longer effective for many merchants and PSPs. These techniques, which were originally thought to be adequate, are unable to keep up with the complexity and speed of contemporary fraud, particularly in high-risk industries.
Manual reviews need a lot of resources and are slow and inconsistent. At a time when fraudsters are already a few steps ahead, they depend on human intervention. Outdated fraud filters, on the other hand, frequently result in false positives or completely overlook more recent threat patterns, which either blocks legitimate sales or allows undetected fraud to pass through.
The fundamental challenge is when these traditional technologies intervene. By the time a chargeback is filed, the outcome is already costly: the funds are withdrawn, fees are imposed, and the merchant’s chargeback ratio increases, regardless of whether the dispute was valid.
In 2025, effective chargeback prevention relies on a more proactive approach that starts earlier in the payment process. Pre-transaction tools are now an essential part of the modern toolkit, helping businesses identify high-risk orders before they’re approved. But timing alone isn’t enough, layering this with post-transaction strategies like chargeback alerts remains critical to capturing edge cases and resolving disputes before they escalate.
Outdated or reactive tools, when used alone, leave gaps in protection. A forward-thinking prevention strategy combines early detection with rapid resolution and ensuring businesses stay protected at every stage of the payment journey.
What Actually Works: Real-Time Fraud Deflection + Alerts
A two-pronged approach is needed to prevent chargebacks in 2025, chargeback alerts as soon as a fraud or dispute trigger occurs, paired with a level of automated handling and real-time fraud deflection prior to the transaction being confirmed.
Making wise choices at the time of transaction is the first phase, known as fraud deflection. Businesses are able to prohibit high-risk orders before they are authorized by analyzing device features, behavioral indications and identity risk in real time. By doing this, fraudulent transactions are kept out of the chargeback process altogether. It’s particularly important in card-not-present (CNP) situations, where conventional verification techniques frequently fall short.
However, not everything can be caught by even the greatest deflection systems. Chargeback Alerts are useful in this situation. When a client disputes a charge, these alerts let merchants know before the issue turns into a formal chargeback. This early notice gives you a brief window of opportunity to contact the consumer, provide a refund, or settle the dispute via automation. When properly executed, this approach stops the chargeback from being submitted, protecting both income and reputation.
The timing of this combo is what gives it its strength. When damage occurs, legacy tools take action. Businesses have the opportunity to take action before fraud occurs because of real-time fraud deflection and alarms.
Merchants, PayFacs, and PSPs may now create a proactive and scalable framework for chargeback avoidance by integrating these two tactics. This framework will reduce operational costs and adjust to evolving fraud patterns. Reacting is no longer sufficient. Staying ahead of chargebacks is currently the only method to prevent them.
The 3-Part Formula to Stop Chargebacks in 2025
The most efficient method to stop chargebacks at scale in 2025 is to use three key tools, despite the complicated environment of changing fraud methods and stricter rules. When combined, they provide a multi-layered defense system for both merchants and PSPs before and after transactions.
1. Scoring for Transaction Risk
It is crucial to assess a payment’s risk in real time before authorizing it. To identify high-risk orders, PayShield’s Transaction Risk Tool uses behavioral patterns, device signals and identification data. By doing this, problems like card testing, bot-driven fraud and fake identities are avoided before they are processed. It is particularly useful in high-volume, high-risk industries where manual assessment is impractical. The benefit? Stopping real fraud doesn’t slow down real customers. This is the basis of contemporary fraud prevention, rather than just detection.
2. 3D Secure for Orders with High Risk
One of the most effective methods for authenticating cardholders is still 3D Secure 2.2, although it shouldn’t be used for every transaction. It should be applied selectively to transactions flagged as high-risk, based on indicators such as fraud score, behavioural patterns or mismatched identity signals.
This ensures that sensitive purchases, particularly in verticals like digital goods, travel and gaming, are properly authenticated before approval, while minimising unnecessary friction for trusted customers. This lowers friction for regular customers. Tactical usage of 3DS returns liability to the issuer and helps prevent friendly fraud.
3. Dispute Intelligence & Chargeback Alerts
Before a chargeback is submitted, Verifi CDRN, RDR and Ethoca offer real-time Alerts when disputes occur. Dispute Intelligence allows companies to settle or issue a refund in an automated manner off the back of incoming Alerts, preserving income and preventing dispute rates from rising above thresholds such as Visa’s VAMP.
Chargeback Alerts are mandatory in 2025. They are the sole method to lower post-transaction risk without having to wait for irreparable harm to occur. They provide a closed-loop system that avoids chargebacks across the whole payment lifecycle when combined with anti-fraud tools.
Why This Matters for PSPs, PayFacs and High-Risk Merchants
The cost of inaction is increasing for Payment Service Providers (PSPs), PayFacs and high-risk merchants. Chargebacks are only a portion of the issue, as card network systems such as Visa’s Acquirer Monitoring Program (VAMP) increasingly use both fraud and dispute data to determine risk. The good news is that early dispute resolution is now a strong, ratio-neutral defense because Verifi Alerts, RDR, Ethoca and Compelling Evidence 3.0 resolutions no longer contribute toward VAMP thresholds.
PSPs can maintain lower fraud exposure, lower merchant dispute ratios and protect portfolios from excessive program violations by using the three-part method, which consists of risk scoring, selective 3DS and Chargeback Alerts. This strategy guarantees risk-aversion at scale for PayFacs overseeing varied or high-volume merchant networks without compromising approval rates or customer satisfaction.
A proactive approach that prevents conflicts from getting worse and guards against income loss from friendly fraud and enumeration is especially advantageous for high-risk merchants and their payment providers. This layered approach offers the most reliable way to reduce chargebacks in 2025 and to stay in good standing with acquirers, issuers and card networks. This is regardless of whether you’re running a gaming platform, travel website or subscription service.
Summary
The chargeback environment is more complicated and harsh than it has ever been in 2025. The ineffectiveness of some methods, the emergence of friendly fraud and heightened enforcement through initiatives like VAMP have all demonstrated that reactive methods no longer work.
Combining real-time fraud deflection with early alert-driven resolution is the only method to stop chargebacks. In addition to lowering disputes, this proactive approach maintains income, safeguards merchant accounts and maintains portfolio compliance.
This approach is no longer optional, it’s essential for PSPs, PayFacs and high-risk merchants navigating aggressive fraud and escalating thresholds.
Get in touch with PayShield today to see how our Chargeback Alert system and fraud deflection tools assist partners in preventing chargebacks at scale.
