Everything about chargebacks, including why they occur, how to handle them, and the review process.
How it affects your company's reputation and how to avoid it.
What is Chargeback?
A chargeback is a dispute raised by the cardholder (end-user) against a specific transaction and reported to their card issuing bank.
A chargeback is a feature offered by banks and card networks like Visa and MasterCard to protect buyers from unauthorised or fraudulent payments.
When a cardholder files a complaint, the bank reports it to the payment partner and begins an investigation.
Chargebacks are of two types-Customer Initiated and Bank Initiated.
Examples of Customer Initiated Chargeback
Transaction not authorized/Fraud
Goods/Services not received or not as Described
Cancelled transaction but credit not received
Wrong and Incorrect Billing
Examples of Bank Initiated Chargebacks
Late settlement by Merchants
Authorization/Invalid authorization obtained
Key parties involved in a chargeback
Cardholder: The owner of the card involved in the transaction.
Merchant: The party who sold the goods or services being disputed.
Issuer: The bank who issued the card to the cardholder.
Acquirer: The bank tasked with acquiring payment on the merchant’s behalf.
Card Association/scheme: The card brands (Visa, Mastercard, etc.) who oversee the process.
Payment Gateway: The payment gateway used to pay money.
Timeframes for raising CBs?
A customer has 120 days to file a chargeback, which means the sale is reversible during that time period. However, in some cases (retrieval requests), this period may extend beyond 120 days, subject to the guidelines set by Card Networks, such as Visa, from time to time (currently 13 months).
Why to Avoid Chargeback?
Chargebacks represent lost revenue and a slew of other potential issues for merchants. A customer has 120 days to file a chargeback, which means that your sales are reversible during that time period.
The worst part about chargebacks isn't only loss of revenue,It is the fact that having too many chargebacks can result in the loss of your merchant account. Card networks and Banks consider chargebacks to be indicative of poor customer experiences and thus detrimental to the industry's health, so they track chargebacks and penalise merchants who receive an excessive number. The penalties may begin with fines and action plans, but the final step is account closure and inclusion on an industry blacklist.
Chargebacks occur because of miscommunication between sellers and buyers. Make sure Merchant’s website or app has an accurate refund or return policy.Recording keeping of Order-related documents such as the invoice and tracking number is essential.
How to Resolve a Chargeback?
Chargeback is as a high priority issue to be treated due to the risk involved for both customers and merchant's bank, and we follow the process outlined below to resolve it.
At Frenzopay we follow the below mentioned process to resolve a chargeback.
As soon as we receive any chargeback from the bank we inform the merchant about the same via Email/Contact.
Once the merchant receive chargeback notification from Frenopzy's Team, the merchant review the transaction and contact Frenzopay's Team with the sequence of events that occurred.
If the goods/services were not provided, please review the situation and let us know if the customer is willing to accept the goods/services.
If the goods or services have been delivered, please share proof of delivery, invoices, or any other authorised proof of product/service delivery.
Document Sharing Process
Once the Review process is over the required document has to be shared by Frenozpay to the banks for representation of chargeback.