Table of contents 2What is a chargeback? 3Reasons for chargeback 4Impact of chargeback 5Chargeback process 5What is necessary to reject chargeback? 7Chargeback solution 9Avoiding chargebacks 10Conclusions 11
what is achargeback?In electronic commerce, a chargeback is a reversal of a credit card transaction. The chargebackprocedure is launched by a bank or initiated by a bank-card issuer at the cardholder’s request.It is a process in which the buyer questions debiting of his/her card in connection with a card trans-action. It is available only to users who pay with their credit or debit cards. Cardholders have theright to dispute any transaction processed on a Visa/MasterCard card.In the chargeback process, the burden of proof is on the merchant. If the merchant provides docu-mentation proving that a transaction was correct, the transaction amount is credited back to hisaccount. If the merchant fails to do so or does so after the deadline, the disputed amount will bereturned to the account of a consumer being a party to the dispute.
reasons forchargebackChargebacks arise for a variety of reasons but generally they are the result of a cardholder notreceiving the product, being dissatisfied with their purchase or the result of fraud. To secure atransaction made with a debit or credit card, the online-selling merchant may use the 3D-secureservice, as part of which the cardholder secures a transaction with a secret password defined inbank e-services.Chargeback reasons as shown on PayU.pl: Product not received (cardholder states never receiving the product) Product not matching description (it was damaged or did not match its description on the website) Duplicate transaction (cardholder placed two or more orders for the same product, thus being charged for each transaction) Fraud (transaction made by an unauthorised person) Not recognized transaction (cardholder does not recognize the payment or forgot about making it) No refund (customer did not receive a transaction refund despite its cancellation or returning the item)
impact of chargebackChargeback impacts all participants of the payment process; these are: Provider of payment services - PayU S.A. or another payment institution taking part in a transaction (Acquirer) Card-issuing bank (Issuer) Merchants Customers (cardholders) CHARGEBACK PROCESS 1 2 3 4 7 6 51. Visa or Mastercard cardholder -> 2. Card issuer -> 3. Provider of payment services (Acquirer– PayU S.A. or another payment institution) -> 4. Merchant -> 5. Provider of payment services(Acquirer – PayU S.A. or another payment institution) -> 6. Card issuer -> 7. Visa or Mastercardcardholder.
1. The cardholder contacts the bank which issued the card in order to dispute a transaction. The card-issuing bank researches the dispute to determine whether there is sufficient evidence to support the cardholder’s dispute.2. The card issuer starts the chargeback procedure by giving it a code relevant for the chargeback reason. In this way the issuer is credited the disputed amount.3. The provider of payment services (Acquirer – PayU S.A. or another payment institution) receives a chargeback with a chargeback code indicating the reason for complaint.4. The provider of payment services informs the merchant that the chargeback has been recorded and requests that the merchant analyses the complaint and provides documents proving that it is irrelevant.5. The merchant provides the provider of payment services with information on whether the merchant accepts the complaint or not. In order to reject chargeback, it is necessary to provide documents proving its irrelevance. If the merchant accepts the complaint or if the provided documents do not sufficiently prove that the complaint is irrelevant (pursuant to Visa and MasterCard regulations), the chargeback process ends and the acquirer charges the merchant’s account with the disputed amount.6. If the merchant rejects the complaint and provides documents proving that the complaint is irrelevant, the provider of payment services rejects chargeback, charging the card issuer with the amount of chargeback and presenting information and documents confirming the relevance of rejecting the complaint.7. In such case, the card issuer informs the cardholder about irrelevance of the complaint and charges the card account with the disputed amount again.In some cases, in responce to the cardholder’s complaint and before launching the chargebackprocedure, the card-issuing bank requests that the provider of payment services sends a copy oftransaction confirmation. In such case, the provider of payment services may request that themerchant presents the transaction confirmation as well.
what is necessaryto reject chargeback?Failure to deliver the item or provide the service Customer’s confirmation of receiving the item (confirmation of sending an item is not sufficient to reject the complaint) or service. The copy of information containing a description of the item/service as well as the shipping date and method presented to the customer during transaction. Information on whether the cardholder contacted the merchant directly with the request to consider the complaint and a description of the course of this complaint with a reason for rejection (if applicable).Item not matching description, damaged item or service provided otherwise than described The copy of information containing a description of the item/service as well as the shipping date and method presented to the customer during transaction, which proves that the item/service does not match the description Document confirming that the customer received the item and confirmed that it was not damaged Merchant’s written statements and documents (if available) if: item was not returned by the customer item/service was repaired or the missing elements were completed Information on whether the cardholder contacted the merchant directly with the request to consider the complaint and a description of the course of this complaint with a reason for rejection (if applicable).
what is necessaryto reject chargeback?Multiple payment for the same item/service (payment with the same card, different card, transferor otherwise) Documents confirming that the payments concerned the purchase of various items/servicesMerchant did not return the transaction amount Confirmation that a relevant return was made Merchant’s written statements and documents (if available) if: item was not returned by the customer the merchant did not accept the return or service cancellation merchant presented the conditions of resignation and returns upon purchaseFraud transaction = made without the cardholder’s knowledge and consent Any documents containing more information about a transaction than data presented in the card transaction settlement file: a detailed description of the ordered item/service, cardholder’s data, addressee’s and shipping data
chargeback solutionChargeback closing reasons on PayU.pl: Refund was granted (the merchant accepts the chargeback and returns the disputed amount into the cardholder’s account) Refund was denied (the merchant proves that the chargeback is irrelevant and thus the payment is valid) Chargeback was lost (the merchant does not respond in due time or the cardholder’s bank has evident proof that the chargeback is relevant)
avoiding chargebacksAny time credit card payments are involved in a transaction, there is always the risk of a chargeback.Sometimes buyers are not satisfied with their purchases, or their order never arrives, or their creditcard has been used fraudulently.The best way to deal with chargebacks is to prevent them from happening in the first place.However, there are several simple steps that can be taken to minimize chargebacks caused bycustomer error or failure to recognize your charge on their account. The order confirmation page must provide the customer with the name, phone number, e-mail address of the company so that the client will recognize the charge when it appears on their monthly credit card statement. Not recognizing a charge is the main reason a customer will issue a chargeback. Send your customers an e-mail confirmation that contains the same company information. Have the return/refund policy clearly stated on the website. Make it a requirement that customers read the policy before their order can be completed.
Have the return/refund policy clearly stated on the website. Make it a requirement that customers read the policy before their order can be completed. Have the merchant’s direct contact data for lodging complaints stated on the website. Many reasons for chargebacks must be preceded with a complaint reported by the cardholder directly to the merchant. Provide accurate descriptions of your products on the website. Respond to the chargeback as quickly as possible.conclusionsEfficient chargeback processing reinforces credibility in card payment systems for a customer. Infact, the chargeback rules protect customers when handling claims. This generates trust in thesystems and motivates the customer to prioritize the use of cards over other payment methods.