Small businesses across Australia are caught in a payment dispute system that experts say is rigged against them, with banks siding with consumers even when merchants produce written proof that goods were delivered.

ABC News reports on one case where a customer emailed a small homeware business owner, identified only as Alex, admitting the chargeback he lodged was a mistake. Alex forwarded the email to NAB as evidence. NAB denied the dispute anyway, citing its own review of “compelling evidence” and noting the customer was still disputing the transaction. Alex ended up out of pocket, without his product, and hit with a fine. The customer eventually paid him back via bank transfer.

Nina Kutzner, founder of the Payment Dispute Institute and a former employee of several major banks and payment schemes, told the Online Retailer Conference in Sydney last week the problem starts with the regulatory framework. “None of these documents are talking about this needs to be fair to retailers,” she said.

Banks have a financial incentive to side with consumers: if a customer is unhappy with how their bank handled a dispute, they can escalate to the Australian Financial Complaints Authority, which can fine the bank. Merchants have no equivalent escalation path. “It’s one-sided policing only,” Kutzner said. “Naturally, it’s cheaper to side with a consumer over a business.”

ABS data shows chargeback decisions overwhelmingly favour cardholders: 72 per cent of people who claimed card fraud were fully reimbursed by their card issuer in 2023-24, totalling $477 million. Worldwide, chargebacks are forecast to hit 324 million transactions by 2028, up from 261 million in 2025. The card schemes, Visa and Mastercard, say they only provide the infrastructure and rules, and that issuing banks decide outcomes. ASIC doesn’t regulate card schemes. The Reserve Bank of Australia covers the relevant legislation but included little on chargebacks in its recent Retail Payments Regulation review, focusing instead on surcharging.

Australian Banking Association CEO Simon Birmingham has acknowledged the system is letting small businesses down. “The ABA supports a comprehensive review of the scheme rules and fee settings so the system fairly balances the interests of both buyers and sellers,” he said. Any such review would fall to the RBA, which announced its next Payments System Regulation review last month. Kutzner says she’s watching whether chargebacks make it onto that agenda.

For trade business owners who sell products or services online, the current system gives consumers a straightforward way to claw back money, and there’s little standing between that click and your cash flow. Until the RBA moves, practical options are tight delivery documentation and signed proof of receipt where possible.

Frequently asked questions

Can Australian small businesses escalate a chargeback decision to AFCA?

No. AFCA is available to consumers, not merchants. If a customer is unhappy with how their bank handled a dispute they can escalate to AFCA, which can fine the bank, but merchants have no equivalent escalation path.

How often do cardholders win chargeback disputes in Australia?

According to ABS data, 72 per cent of people who claimed card fraud in 2023-24 were fully reimbursed by their card issuer, totalling $477 million.

Who regulates card scheme chargeback rules in Australia?

Visa and Mastercard say they only provide infrastructure and rules, and that issuing banks decide outcomes. ASIC doesn’t regulate card schemes. The Reserve Bank of Australia covers the relevant legislation but gave chargebacks little attention in its recent Retail Payments Regulation review.

Sourced from ABC News, Australian Bureau of Statistics, Australian Banking Association. Original article.