You can have a 0% chargeback rate and still get shut down

Chargebacks cost merchants more than most realize. There’s the dispute fee, the lost revenue, the operational overhead. And underneath all of it, the risk of losing the ability to process payments entirely.

In this latest episode of Payments Unfiltered, I sat down with Qi Cao, co-founder and CEO of Chargeblast, to discuss how chargebacks actually work, what the Visa Acquiring Monitoring Program (VAMP) means for merchants, how to think about dispute thresholds, and why the merchants managing chargebacks best are asking a very different question than everyone else.

Qi has worked with over 6,000 merchants globally. The pattern he sees most often is merchants obsessing over a number that doesn't actually keep them safe. Payments risk, he says, is almost always the last thing founders think about. And the first thing that can shut them down.

The number to actually care about

When chargeback rates climb, the instinct is to drive them to zero. 

"Getting to zero is really not worth it. And if you're a merchant that wants me to get you to absolutely zero, it's not even feasible," says Qi. 

The target he works toward with merchants is 0.5% after alerts. It’s achievable and realistic given the geographic and issuer coverage limitations in every alert system.

But even hitting 0.5% doesn't make you safe because there's no number that does. Processors don't decide on chargeback rate alone. They look at the full picture:

• The reason codes behind your disputes, not just the volume
• Reviews and customer satisfaction signals
• Whether your checkout pre-selects a subscription box
• Whether your billing terms are visible or buried

Qi put it best with something he heard directly from Shopify. They told him they're "actually comfortable with somewhat elevated chargeback rates, but the customers need to be happy."

Think about what that means. Processors know that around 70% of chargebacks are friendly fraud, so they're not looking for a perfect number. They're asking whether your business is legitimate and whether your customers feel treated fairly. 

A merchant with a 0% chargeback rate and a checkout designed to obscure subscription terms will still get shut down.

Why your processor's portfolio is now your problem

Last year, Visa retired two of its longest-running merchant monitoring programs and replaced them with a single, unified framework called the Visa Acquiring Monitoring Program (VAMP). The payments industry had been watching it coming for months. When enforcement began in October 2025, the impact was immediate.

Merchants saw their accounts frozen or terminated by payment providers as acquirers began aggressively enforcing Visa's new fraud and dispute thresholds. For merchants who had ignored the compliance guidance or failed to adjust their ratios, the result was sudden. They couldn't process payments anymore and high-risk sectors felt it hardest. 

What made VAMP structurally different wasn't just the thresholds. It was who Visa decided to hold accountable. Previously, Visa policed merchants directly but VAMP moved enforcement upstream. Visa now monitors acquirers, not individual merchants. Meaning, your processor's entire portfolio is under scrutiny now. If that portfolio carries too much aggregate risk, Visa fines the acquirer, and the acquirer cuts merchants. 

A single merchant with a high dispute rate can effectively poison an acquirer's entire portfolio, pushing them over VAMP thresholds and triggering penalties from Visa. That dynamic turned merchants in high-risk categories from clients into liabilities overnight. Qi saw this play out in real time: "A lot of European acquirers went down because of VAMP earlier this year."

The knock-on effect for merchants has been counterintuitive. Higher-risk processors, the ones that historically specialized in difficult merchant categories, are now the most dangerous place to be. As Qi describes it, they took on so many high-risk merchants that their collective VAMP ratios are now through the roof, and now have to cut merchants to bring ratios down. The safest place for a high-risk merchant today, Qi says, is actually inside a large, low-risk processor portfolio where their risk gets diluted across millions of other transactions.

The thresholds have only tightened since. This past April, the merchant excessive threshold dropped from 2.2% to 1.5% across the US, Canada, and the EU. Merchants who were compliant in March could be in violation in April without changing a thing about their business. 

What an actual chargeback strategy looks like

Most merchants reach for a tool the moment their chargeback rate climbs. Qi's advice is to slow down.

The cheapest and most durable fixes have nothing to do with technology. Tightening fulfillment times so customers aren't disputing out of frustration, making subscription terms impossible to miss, or having customer service that actually picks up are business fixes that happen to show up in your chargeback rate.

Once that foundation is solid, alert tools do the rest of the work. RDR (Rapid Dispute Resolution), CDRN (Cardholder Dispute Resolution Network), and ethical alerts each notify the merchant of a dispute before it's formally recorded, giving them a window to refund the customer directly and stop it becoming a chargeback. Coverage isn't universal because geography, issuer enrollment, and network limitations all create gaps. But for most merchants in major markets, coverage is strong.

Deflection is the more recent development and the more interesting one. Rather than resolving a dispute with a refund, it challenges it. When a cardholder files under a fraud code, deflection sends IP address and transaction history to the issuing bank to demonstrate the cardholder has an established relationship with the merchant. The issuer closes the dispute, and the merchant keeps the revenue.

"No refunding is needed to prevent that chargeback. Literally, it's just the issuer shutting down the cardholder from charging back because it's friendly fraud," Qi points out. 

Even with all of this in place, there are no guarantees. Automated risk systems at processors make decisions without human review. A new MID, an unfamiliar geography, or a portfolio-level flag can trigger a shutdown regardless of how clean your numbers are. 

As Qi puts it: "I've seen merchants do best practices, leverage solutions, and then they still get shut down. Just because their processing accounts are new or they're processing in a geography that perhaps the payment processor is not too comfortable with."

Beyond the chargeback rate

The strategy for today is clear. What's less certain is what merchants are walking into next.

Looking ahead, Qi expects chargebacks to go up as agentic commerce scales, where AI agents make purchases on behalf of consumers with even less friction than one-click checkout. His reasoning is simple: "Any time there's a technology that reduces the friction to purchase, chargebacks usually increase. When you're checking out for a product you wanted at the spur of the moment and it's a one-click checkout, and then you regret it the next day, you're likely gonna refund."

Agentic commerce removes even that moment of deliberation entirely.

The infrastructure to tell an AI-authorized purchase apart from a human one isn't fully in place yet either. Visa is working on agent identification tokens, but as Qi puts it, "technology is moving forward no matter what. And let's be honest, they're not waiting for the regulation to come into fruition." The frameworks will catch up and merchants will get there first.

Qi thinks agentic commerce is a net positive for merchants regardless. "The cost benefit majorly benefits the merchants from a revenue perspective more than the actual chargeback perspective. They may get more chargebacks, but I think they're gonna get much more revenue." With more volume, better conversion, higher revenue, and a mitigation strategy already in place, the math will work out.

The merchants who get caught out are the ones who adopt the technology first and build the strategy second.

The strategy always starts in the same place. Before any tool, any alert platform, or any provider, Qi suggests asking "why."

Why is three out of every 100 purchases ending in a dispute? What are the reason codes saying? Could it be my checkout design, subscription terms, fulfillment speed, or even marketing?

Qi has worked with thousands of merchants. His closing point is the most honest part of this conversation:

"If you have a chargeback rate issue, it's a fundamental business model issue. And if you can keep your business running by fixing that fundamental business model issue, that's what you should do."

Listen to the full conversation with Qi Cao on Payments Unfiltered, available on YouTube, Spotify, and Apple Podcasts.

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