Most merchants managing chargebacks believe they’re doing reasonably well. They track their win rates, they represent disputes diligently, and when the numbers come back showing they’ve won nearly half their cases, they take that as confirmation that their program is working.
According to new our 2026 Chargeback Field Report, merchants report winning 44.6% of the chargebacks they receive. That’s a number that, on the surface, looks defensible. The uncomfortable truth is that it’s largely illusory, though.
The merchants who are optimizing their chargeback programs around first-cycle win rates are inadvertently measuring something that flatters their performance without reflecting their actual outcomes.
What First-Cycle Win Rates Don’t Tell You
When a merchant successfully contests a chargeback through representment, the dispute appears resolved. The win gets recorded, the revenue gets recovered, and the win rate ticks upward. What most merchants don’t account for is what can happen next.
A cardholder or issuing bank can reopen a resolved dispute through what’s known as a second-cycle dispute; essentially a re-dispute of the original transaction triggered by new or additional evidence. These aren’t edge cases. Our 2026 Chargeback Field Report found that merchants lose 19% of their first-cycle wins to second-cycle escalations.
The math matters here. If a merchant wins 44.6% of chargebacks in the first cycle, but then loses 19% of those wins to second-cycle reversals, their effective win rate drops to roughly 25.6%. That’s a significant gap between perceived performance and actual outcome.
It gets worse. After a second-cycle dispute, the only recourse is arbitration at the card network level. So, while a second-cycle dispute is not necessarily final, it’s rarely worth the additional effort and cost. Merchants are better served redirecting their energy toward contesting strong first-cycle cases than attempting to recover losses at the second-cycle stage, because once a dispute escalates that far, the window for meaningful recovery has effectively closed.
Even 25.6% Is Generous
Even that adjusted figure overstates reality, for two reasons that deserve direct examination.
The first is the identification problem. Friendly fraud chargebacks —those filed by genuine cardholders for illegitimate reasons — are notoriously difficult to distinguish from legitimate disputes at the point of intake. These are real customers making real purchases who later file chargebacks due to buyer’s remorse, financial pressure, forgetfulness, or opportunism. Because they look like ordinary transactions at checkout, merchants can’t flag them all.
Friendly fraud that goes unidentified go uncontested, and uncontested chargebacks are automatic losses. Those losses don’t enter the win rate calculation at all, which means they quietly suppress actual outcomes without appearing in the metric merchants are watching.
Second, we have the representment gap. Merchants don’t fight every chargeback they receive, nor should they; the economics don’t always support it, particularly at low transaction values.
But, when merchants calculate win rates only against the disputes they choose to contest, they’re excluding a category of automatic losses from the denominator. That exclusion inflates the reported rate. If you average in the disputes you walked away from, the effective win rate drops further still.
The Metric That Actually Matters
So, what should merchants be tracking? The answer is “net recovery rate,” or the amount of revenue recovered through representment, minus representment costs, expressed as a percentage of total revenue lost to chargebacks across the full cycle.
To make this concrete: a merchant who receives 30 chargebacks in a month at an average order value of $150 has $4,500 in disputed revenue. If they choose not to contest 16 of those disputes, win five of the remaining 14 in the first cycle, and then lose two of those five wins to second-cycle reversals, then they ultimately recover revenue from only three chargebacks. If those three represent $450 in recovered revenue, their net recovery rate is 10%.
That’s not a hypothetical. The Chargeback Field Report puts the average net recovery rate at 10.7%. For every $100 in disputed revenue, the average merchant recovers barely more than $10.
The gap between a 44.6% first-cycle win rate and a 10.7% net recovery rate is not a rounding error. It reflects how much of the chargeback lifecycle most merchants aren’t accounting for.
What This Means for Chargeback Strategy
The way merchants measure their programs shapes how they improve them, and a program optimized around first-cycle win rates is optimizing for the wrong outcome.
I’ve watched merchants invest significantly in representment workflows, celebrate improving win rates, and still absorb chargeback losses that were quietly compounding below the surface. The win rate looked good. The revenue picture didn’t.
Net recovery rate captures what actually happened: how much was lost, how much was recovered, and what it cost to recover it. That’s the number that connects chargeback management to business outcomes. Everything else is an intermediate metric that tells only part of the story.
Merchants who want a clearer picture of where they stand should start by pulling both numbers and examining the gap between them. That gap is where the real work is.
