The Green Sheet Online Edition
December 8, 2025 • 25:12:01
StreetSmarts
Wanted: A fair fight against chargebacks
How could someone enjoy a good meal and charge it back the next day? Shocking as it may seem, this happens every day. Why would a card-issuing bank rule in that person's favor, even with proof the customer paid at the table with an EMV card and manually added a tip?
Ecommerce merchants have robust, automated tools for mitigating chargebacks. It's time to extend the same courtesy to retail and hospitality merchants faced with escalating disputes by people who try to reverse-engineer their purchases. Here are some examples:
- Buyer's remorse: Restaurant, bar and nightclub patrons get home and say, "I just dropped $400 for dinner and it wasn't that great," or "How did I spend so much at the bar last night?"
- Caught red-handed: Big spenders are reprimanded by a spouse for a large bill or going to an adult entertainment venue or by a boss for spending $1,000 on dinner on a corporate card when they didn't even close the deal.
- Friendly fraud: Children mistakenly or intentionally use a parent's card or compulsive shoppers buy and buy and pretend they weren't at a store or never received an item. Merchants are required to present a bill, EMV receipt and proof of delivery, even when issuers can clearly see that a card was presented onsite at the point of sale.
- Free drinks: People know most bars don't run tabs, so they close out multiple tabs with identical totals and claim they were duplicate transactions to get out of paying for drinks. Businesses need to avoid charging customers the same exact amount multiple times, which could inadvertently flag the cardholder bank to issue a chargeback for duplicates.
- Reason codes: People use random reason codes, hoping merchants will not rebut bogus claims that meals were unauthorized, canceled, damaged, defective, double-billed, overpriced, paid by other means, unshipped, partially received, not suitable for intended purpose, or served in absentia to people who cleaned their plates while they weren't there.
- Incorrect tip adjustments: When a tip is wrongly adjusted or is more than 20 to 25 percent of the transaction, restaurants lose money on tips that were already paid to staff due to mathematical errors or generous tips that exceed floor limit. This issue can be avoided by adjusting tips at the time of sale to authorize the total amount including tip.
Time to start winning
I try to tell merchants that the days of sending receipts to the bank are over. It's a mistake to send in receipts without a letter of explanation that clearly addresses the issue and helps the chargeback department understand the situation.
These letters must be short and to the point because chargeback departments deal with thousands of disputes and don't have time to research or try to understand a particular merchant or situation.
Keep the letter simple. Explain how someone bought a shirt at your store and the receipt clearly states that all sales are final, or that a customer paid with an EMV card, which proves a card-present sale.
Or explain how a customer dined and paid for a meal in your restaurant, where sales are always final because that's how it works in restaurants. Above all, keep these letters all about business. Skip details about the customer's behavior.
So many restaurants and bars don't bother responding to small-transaction disputes. They just eat them and move on. But I had one merchant who got wise to a serial offender who kept charging back the same card; that person has been permanently banned from the restaurant. Card issuers should consider revoking these credit cards accounts as well.
Toward intelligent systems
Merchants can use AI to help draft chargeback letters, spot fraud and react quickly to disputes. It's a good idea to have a few boilerplate chargeback letters in the merchant portal, available for your merchants to download, email or fax to card issuers. If they don't have a fax machine, they can get an e-fax account for around $10 to $20 per month.
When we train merchants on how to leverage artificial intelligence and machine learning, we always tell them that working with AI is a journey. Don't expect your AI agents to get it right every time. Train them, review and edit their work, and continue to provide feedback.
With all the advanced, affordable tools and technologies available to merchants today, there's no reason why businesses can't have the upper hand in mitigating risk and disputes. Helping merchants leverage these solutions goes to the very heart of what we do, and our value proposition as ISOs and merchant level salespeople.
Want to know more? Keep reading The Green Sheet and consider following me on LinkedIn, where we can share ideas and support each other.?? 
Allen Kopelman, a serial entrepreneur, is co-founder and CEO of Nationwide Payment Systems Inc. and host of B2B Vault: The Biz to Biz podcast. Email him at allen@npsbank.com and connect on LinkedIn https://www.linkedin.com/in/allenkopelman/ and Twitter @AllenKopelman.
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