Events: Chargebacks, Reversals
Chargebacks/Disputes
= the return of funds to a customer’s account after they dispute a card payment.
Some reasons chargebacks may happen are if a cardholder claims:
a card payment was fraudulent,
the services were not provided, or
the merchandise never received
Chargeback flow:
Cardholder contacts their issuer - The cardholder initiates the chargeback process by contacting their issuing bank to query a disputed transaction.
Issuer creates a dispute case via the card scheme - The issuer reviews the disputed transaction, creates a formal dispute case via the relevant card scheme and assigns a chargeback reason code, which describes why they are charging back the transaction.
Acquirer receives and reviews the chargeback - The acquirer receives notification of the chargeback via the relevant card scheme. If they have evidence to counter the chargeback, they submit it on the merchant’s behalf. If no such evidence is available, the acquirer will ask the merchant to supply evidence.
Merchant receives and reviews the chargeback - The merchant reviews the chargeback and responds via their acquirer. If the claim is legitimate, the merchant will accept the chargeback. Or they challenge the chargeback if they have compelling evidence the claim is illegitimate.
Issuer reviews evidence and decides on the chargeback - The issuer reviews the evidence received from the acquirer and decides on the case. If the evidence refutes the cardholder’s claim, the merchant wins. If the evidence does not refute the cardholder’s claim, the merchant loses.
Cardholder and merchant are notified of decision - The cardholder and merchant are notified of the case decision. If either party disagrees, they may have the option to argue further via an arbitration process, depending on the circumstances of the case.
Reversals
= process that revokes a previous transaction. There are three main categories of payment reversals:
Authorisation reversals - takes place before a payment has been completed due to issues raised during the transaction processing (e.g. user cancels the transaction)
Refund reversals - the merchant returns funds to the customer’s bank.
Chargeback reversals - the customer’s issuing bank refunds the customer and then seeks to reclaim the money from the merchant. If the merchant does not dispute the chargeback, it will need to refund the customer plus an additional penalty fee to the issuing bank.
Resources:
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