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If you receive payments from international clients—whether through credit cards, PayPal, or Stripe—you’ve probably heard of chargebacks. It’s meant to protect buyers from fraud. But what happens when dishonest customers exploit that system?
That’s called chargeback fraud and it’s becoming one of the most annoying risks for Indian SaaS founders, digital marketers, consultants, and exporters.
In this article, we’ll break down what chargeback fraud is, why Indian companies are more vulnerable, and most importantly—how to protect yourself with safer international payment methods like SWIFT transfers.
Chargeback fraud—also known as friendly fraud—happens when a buyer tells their bank or card issuer that a charge was unauthorized, defective, or undelivered after they've already received the product or service. That may sound like a customer protection mechanism at first. But in reality, it's often a calculated—and very deliberate—abuse of that system.
There's a big difference between a legitimate dispute where a package never arrives or a subscription is billed incorrectly, and chargeback fraud. In those cases, the customer is genuinely upset. In chargeback fraud, the customer knows exactly what they're doing. They complete the purchase, wait for delivery or service to be fulfilled—and then falsely claim the charge was unauthorized. That way, they can get their money back without returning anything.
That's not an unusual occurrence. In fact, friendly fraud now accounts for 60 to 80 percent of all chargebacks in global e-commerce, according to industry reports. And because banks often side with the buyer, especially in cross-border cases, the business ends up carrying the burden of proof. That can be tough to fight, especially if you're selling digital goods or services.
For Indian exporters and SaaS companies selling abroad—especially to U.S. or European consumers—chargebacks can cause real problems. You might lose revenue, despite having fulfilled the order. You might get hit with penalties from payment processors like PayPal or Stripe. And you risk damaging your reputation and even having your account shut down.
Chargeback fraud is essentially theft by another name. And when your client is overseas, it becomes even harder to challenge those claims.
Chargeback fraud is a global problem but Indian businesses face some unique systemic and structural challenges when dealing with international clients.
International card payments go through multiple currency conversions and intermediary banks. These layers introduce delays and discrepancies that can make it hard for Indian businesses to detect a fraudulent transaction until it’s too late. By the time a chargeback is initiated, the service may have already been delivered.
Having a local presence (like a US based office or legal entity) can help with buyer side verification, legal recourse, and faster dispute handling. Indian exporters without such representation are at a disadvantage both legally and perceptually when challenging a chargeback initiated by a foreign buyer.
Many payment processors (like PayPal) freeze merchant accounts or impose heavy penalties if the chargeback ratio crosses 1%, even if those chargebacks are fraudulent. For Indian SaaS businesses or exporters with lower transaction volumes, even 2 or 3 chargebacks can breach the threshold and lead to withheld funds or account termination.
Mastercard’s chargeback process has multiple stages – pre-dispute, chargeback initiation, merchant response, decisioning, and arbitration. This can be overwhelming for Indian businesses, especially SME,s when dealing with international disputes.
RBI’s Exchange Control Manual has strict compliance requirements for exporters – timely submission of export documents and specified payment methods. Non-compliance can attract penalties and impact future transaction capability.
So, Indian businesses need to take measures against chargeback fraud like using secure payment channels and maintaining transaction records meticulously.
Chargeback fraud is not complicated—it’s ridiculously simple. A seemingly legit customer places an international order or subscribes to a service and then reverses the payment later through their card issuer. Here’s how it plays out for Indian businesses selling globally:
Chargeback fraud often hides behind legit-looking complaints. Without real-time alerts or strong documentation, Indian exporters and SaaS businesses can be easy targets. That’s why using secure, trackable payment rails like SWIFT transfers via virtual bank accounts is highly recommended.
Chargeback fraud can be tough to reverse but it’s possible to prevent. Indian businesses dealing with international clients can reduce their risk by being more documentative, using better payment infrastructure, and being proactive about client screening. Here’s how to get started:
Sounds obvious but you should always formalize your engagements with clear contracts (even if you are a freelancer). These should have:
A signed contract—even digitally—adds a lot of weight to your case if a dispute arises, especially if escalated to a payment processor or bank.
For digital services or consulting, “delivery” isn’t always tangible, but it can still be verified. Keep:
This kind of documentation strengthens your chargeback rebuttal file and proves the service was used or delivered.
Prevention starts before the invoice. Be cautious of:
For international clients, especially in high-risk regions, a basic due diligence check (e.g., business registry lookup, VAT verification) can go a long way.
Choose invoicing platforms that let you embed terms of service and refund policies into the invoice. This helps:
It also improves cash flow visibility and makes clients less likely to dispute impulsively.
While credit cards and wallets are convenient, they’re also easiest to reverse via chargeback. For high-value international projects, consider safer alternatives like:
These methods don’t allow chargebacks in the same way cards do, giving Indian businesses more certainty and legal clarity.
When dealing with international clients, one of the best ways to protect your business from chargeback fraud is by using SWIFT transfers. Unlike card payments, these transfers move money directly between verified bank accounts through a globally recognized messaging system—the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
Here’s why Indian exporters and service providers are increasingly switching to SWIFT for secure cross-border transactions:
Once a SWIFT payment is initiated and settled, it cannot be reversed without the sender’s explicit consent. This eliminates the risk of buyers disputing a charge after receiving your product or service.
To make a SWIFT payment, your client must initiate the transfer through their regulated financial institution, which often includes multi-factor authentication, identity verification, and internal compliance checks. This reduces the risk of fraud compared to credit cards or wallets, where identity verification can be weak.
For larger invoices—common in software licensing, consulting or bulk product orders—SWIFT is ideal. Many Indian B2B businesses using card payments face limits or high fees on larger amounts. SWIFT scales well for payments worth thousands of dollars or more, making it a preferred method for long-term or enterprise clients.
When combined with international virtual accounts offered by fintech platforms like Karbon, SWIFT transfers become even more efficient. You can receive payments in USD, EUR, GBP, etc., and convert them to INR at competitive rates without funds getting stuck in intermediary bank loops that slow down traditional exports.
Each SWIFT transfer generates a unique MT103 document, which acts as a digital proof of payment. This is not only useful for reconciling invoices but also helps with RBI export documentation such as FIRA (Foreign Inward Remittance Advice). It keeps your compliance clean and audit-ready.
Karbon is a smarter alternative to card payments for Indian exporters, agencies, SaaS companies and freelancers. With Karbon:
Whether you’re billing US clients for development services or collecting retainers from Europe, Karbon lets you do it the professional way.
Yes. Chargeback fraud, when a buyer intentionally disputes a legitimate transaction to reclaim funds, is a form of digital financial fraud. While the process is often handled by card networks, knowingly abusing it can be criminal intent and financial misrepresentation.
In India, knowingly committing chargeback fraud can lead to serious consequences under Information Technology Act, 2000 and Indian Penal Code (IPC). Offenders can be charged with cheating (Section 420 IPC), identity misuse and cybercrime. Penalties can include fines and imprisonment if the fraud involves forged documents or cross-border deceit. Businesses can also sue for damages or file a complaint with Cyber Crime Cell of Indian Police.
Yes, especially if the transaction value is high. Merchants can report fraudulent chargebacks to Interpol’s cybercrime division and local cyber cells. But enforcement varies by jurisdiction and volume.
For smaller transactions, Stripe or PayPal may be convenient. But they’re riskier for high-value B2B payments, especially for Indian exporters, due to higher fees, delayed settlements and higher chargebacks compared to irreversible SWIFT transfers.
Not typically, especially in established B2B relationships. Many businesses globally prefer SWIFT for its audit trail and contractual clarity. Through Karbon, clients pay into local accounts, which removes friction and speeds up processing.
In most cases, funds are received within 1–3 business days. Karbon routes payments through local receiving accounts in the US, UK or EU, much faster than traditional cross-border wires.
