CHARGEBACK

• What is a chargeback?

A chargeback occurs when a customer contacts their credit card issuer or bank and disputes a charge on their account, and requests a refund. Chargebacks are initiated for a variety of reasons, including:

• Transaction not recognized by the cardholder

• Duplicated transactions processed

• Goods/Services not received or faulty

• No authorization was obtained

• Fraud inquiries

• Legal proceedings

• POS system errors

• How do the chargebacks process?

A cardholder initiates the chargeback process over a disputed payment/transaction and asks the issuing bank to reverse it. The issuing bank gathers the necessary information to confirm if the dispute is appropriate.

At the customer's request, the bank proceeds with the chargeback, issue a provisional credit to its account and contacts the acquirer bank to notify them of the chargeback.

The acquirer bank receives and resolves the chargeback issue and forwards it to the merchant. Merchant either accepts the chargeback or fights it by sending conclusive evidence to the acquirer. After detailed reviewing, the acquirer sends the representment to the issuer bank & the issuer reviews the evidence, takes the decision, and notifies the merchant and the cardholder.

If the Chargeback is invalid, it will be declined and returned to the Issuer. If the Chargeback is valid, the Chargeback amount is debited from the merchant’s account and a written notification is provided to the merchant.

• What is a payment gateway?

A payment gateway is an e-commerce service that merchants use to accept debit or credit card payments from customers.

• Who is a processor?

A processor is an intermediator between the merchant and the banks, authorizes transactions & facilitates the fund transfers.

• What is an acquiring bank?

An acquiring bank is a financial institution that maintains the merchant's bank account. The acquiring bank manages payments for the merchant through a payment processor and credit network.

• What is an issuing bank?

An issuing bank issues the credit card and manages the accounts of the cardholders. The issuing back acts as a middleman between the customer and the card network.

• How will you know if you have received a chargeback?

Merchants can get chargeback notices through various means like an email from the acquirer bank. And some processors also offer the email alerts option for the merchant.

• What follows when you receive a chargeback?

When a chargeback is initiated, a provisional credit is transferred to the customer's account—the merchant either accepts the chargeback or challenges the cardholder/customer's claims with compelling evidence.

• What is a chargeback fee?

Chargeback fees are monetary charges imposed by acquiring banks to meet each expense a merchant receives during the process.

• Why do chargebacks happen?

Chargebacks happen due to a variety of reasons which can include:

- The cardholder does not accept the transaction

- The merchant did not provide the service.

- The customer was not satisfied with the service.

- There was a merchant error.

- An offender created a counterfeit card with the hacked account data.

• What is a credit card chargeback?

A credit card chargeback happens when someone uses their credit card to make the transaction.

CHARGEBACK RATIO

• What are the risks for a merchant's account if it received too many chargebacks?

Merchants should aim for a chargeback rate as down as it can be possible because a high chargeback rate can lead to a frozen account or be listed as a high-risk merchant.

DISPUTE MANAGEMENT

• What are customer disputes?

The total number of disputes filed by customers.

• What is the total disputed amount?

The total disputed amount is the outstanding open amount of a disputed case. In short, the total amount disputed by the customer.

• What is a won amount?

The percentage of the total number of disputes won to the total number of disputes filed by the customers.

• What is a loss amount?

The total number of disputes lost to the total number of disputes filed by the customers.

• What is a potential win?

The percentage of the total number of disputes pending with the merchant corresponding to the total number of disputes filed by customers.

• What is a potential loss?

The percentage of the total number of disputes pending with the merchant corresponding to the total number of disputes filed by customers.

CHARGEBACK FRAUD

• How to prevent chargeback fraud?

Merchants can combat chargeback fraud by taking various steps:

- Use reliable credit card verification methods.

- Detailed analysis of past dispute data.

- Establish guidelines and procedures for staff.

- Discover fraud category, time & amount patterns.

- Using appropriate tools to ease the process.

- Do not split declined transactions into smaller amounts to avoid authorization.

- Never accept expired credit cards.

- Get authorization and ensure it is for the full amount of the sale.

- Keep copies of invoices, proof of delivery, quotation, emails, faxes, and other correspondence.

- Communicate with customers to establish satisfactory solutions to problems related to goods and services provided.

- Get full name, address, phone number, credit card number, name of the bank, expiry date, CVV, and DOB for CNP transaction.

• How to prevent friendly fraud?

Fighting friendly fraud is quite effortful, especially with card-not-present transactions, but one can try to prevent it by:

- Prompt response to customer issues.

- Training staff to pay attention to every red flag.

- Follow the processor protocol.

- Transparent payment descriptor.

- Analyzing dispute, time, amount patterns.

PRE-ARBITRATION & ARBITRATION

• What is arbitration?

When any of the parties (Cardholder or Merchant) are not satisfied with the banks' decision or cannot resolve the dispute independently, they can go and appeal into the arbitration. A representative of the card network is required to mediate and get to a decision.

• What is pre-arbitration?

Pre-arbitration occurs when a cardholder initiates a dispute transaction for a second time. It is also called a second chargeback or a second presentment.

• How can you prevent pre-arbitrations?

Arbitration is a considerably expensive ordeal, so fighting and preventing chargebacks is always the safest stratagem for merchants. Providing compelling evidence, understanding the reason codes, providing excellent customer service, and prompt response to retrieval requests can help you prevent chargebacks even go to arbitration.

• What is the time limit for disputing a pre-arbitration?

It can take up to 1-3 days after the cardholder initiates a dispute on the transaction.

CHARGEBACK ALERTS

• What are chargeback prevention alerts?

Chargeback prevention alerts enable merchants to address customer issues before they become official chargebacks. We send chargeback alerts via email to the merchants to notify them to take quick and prompt action on the applied chargeback.

• How can chargeback alerts help me?

Chargeback alerts provide a unique opportunity that enables merchants to evade transaction disputes, reduce chargeback rates by almost 20-30%. As soon as we receive the chargeback information, we email the merchant daily.

REASON CODES

• What is a reason code?

A chargeback reason code is an alphanumeric code given by the issuing bank, which is intended to classify the reason for the dispute.

• Why do reason codes matter?

Reason codes provide the correct information to address & track chargebacks.

• What is the difference between fraud and non-fraud chargebacks?

• Fraud chargebacks are where the cardholder's card was used fraudulently or used without their knowledge to perform the fraudulent activity.

• Non-fraud chargebacks are cases where the cardholder authorizes the transaction and disputing it due to some inconvenience.

REPRESENTMENT

• What is a representment?

Chargeback representment means when the merchant doesn't accept the chargeback claims and disputes it back.

• What does late presentment mean?

Chargeback representment means when the merchant doesn't accept the chargeback claims and disputes it back.

• What should be included in a chargeback representment?

Chargeback representment should include compelling evidence, reason code specific, other detailed information which can prove the transaction happened. Proper evidence can help the merchant win the case and get the debited money refunded.

• Where to submit chargeback representments?

Chargeback representment should contain all the necessary evidence & must be submitted to the acquiring bank.

RESPONSE TO CHARGEBACKS

• What are chargeback reversals?

A chargeback reversal is a process of convincing the bank that a chargeback dispute is invalid and should be reversed.

• What to do when receiving a chargeback?

When a merchant receives a chargeback, it should be acknowledged promptly. Merchants have around 45 days to respond if they want to dispute it.

• How to know if you have won a chargeback?

If Merchant wins the chargeback, then the cardholder's bank returns the disputed amount to their account.

• How to prove a transaction is valid and not fraudulent?

By presenting compelling evidence as proof that transactions are legitimate, a merchant can fulfill his end of the bargain.

TIME LIMITS

• How long does an entire chargeback process take?

Chargebacks are a much-involved process, where cardholders have a 120-day chargeback filing window, and the merchant, on average, approximately 45 days to answer if they want to dispute it.

Overall, an entire chargeback process takes about 45 days. Though, some chargeback cases can take up to 6 months to get settled.

RETRIEVAL REQUESTS

• What are retrieval requests?

Retrieval requests are like a query about a transaction. The issuing bank files on the cardholder's account if they suspect the transaction is fraud.

• How long do you have to respond to a retrieval request?

Retrieval requests should be responded to within 2-6 days to reduce the implied risk.

• What happens if you ignore a retrieval request?

If a merchant does not respond to the retrieval request, it might turn into a chargeback with no reversal rights carrying extra expenses.