Chargeback refers to the process whereby a customer disputes a charge from a business on their credit card statement, leading to the reversal of the transaction.
Example: A business, XYZ Corp, partners with a SaaS provider for accounting software. XYZ Corp notices irregularities in software usage charges on their monthly bill and disputes these charges with their credit card company. Upon investigation, if the credit card company finds the dispute valid, the charges are reversed from XYZ Corp's account, and the SaaS provider receives a chargeback, effectively removing the transaction's revenue and potentially incurring additional fees.
Understanding chargeback helps businesses mitigate financial risks associated with payment disputes, improve customer service, and develop strategies to reduce the incidence of invalid chargebacks.