Chargeback/Dispute/Refund/ Reversal

1. When is a dispute converted to chargeback?

When a cardholder approaches the issuing bank to file a dispute (that may occur due to unauthorized charges or Failure to deliver the promised merchandise or excessive charges levied by the business) with the appropriate supporting documentation.

If the issuing bank determines that the dispute is valid, it has the right to initiate a chargeback. This is the stage where the dispute is converted to chargeback.

2. What is the difference between a valid and an invalid dispute?

Valid Dispute: A valid dispute is when the merchant makes an error, such as double-swiping the cardholder’s card at POS or entering the incorrect amount rather than the actual charge for the product, or canceling the order by the cardholder, etc.

Invalid Dispute: An invalid dispute is when the cardholder has made any mistake (i.e., if the cardholder has shared their card details with someone else) or when the cardholder’s bank has committed some mistakes.

3. What is the most common cause for bank chargeback?

• Usage of expired card/account.

• Authorization was denied, but the cardholder went with the transaction.

• The amount charged to the cardholder differs from the amount shown on the receipt.

• The same transaction was processed more than once on the same account.

4. What is the difference between a chargeback and a refund?

Refund: Refund comes directly from the merchant proactively.

Chargeback: A chargeback is a dispute raised by the cardholder to acquiring bank via issuing bank.

5. What is the chargeback cycle?

A chargeback period is a timeframe during which a cardholder can dispute a card transaction with a merchant. The chargeback period varies depending on the payment processor and the transaction type but is typically 120 days from the transaction date, and it is included in the chargeback cycle.

6. Can cardholders directly raise a dispute?

Before raising the dispute, the cardholder can approach the merchant and try to solve the issue between them. However, if the merchant is not responding properly or the cardholder is not satisfied with the merchant’s response, the cardholder can raise a dispute through their issuing bank.

7. Does the cardholder require documentation to raise a dispute?

Yes, certain disputes like cancellation, payment by other means, refund promised by the merchant, merchandise returned, etc., are the documents required to raise a dispute.

8. When can a cardholder raise a partial chargeback?

• A cardholder received or utilized a portion of the services or merchandise.

• The cardholder only has an objection to the portion of the purchase. Eg. Five of the six items shipped were satisfactory; the chargeback only applies to one unsatisfactory item.

• The merchant overcharged the card, and the cardholder only disputes the excess.

9. What is the turnaround time of each stage in the Chargeback cycle for NFS, RuPay, Visa, and MasterCard?

Refund: A refund is a process where a customer transaction is successful, and the amount is debited from the customer’s account, which the acquirer or merchant subsequently claims as payment in the settlement. The merchant then starts the refund process for the cardholder. Usually, refunds are initiated for the following reasons:

• The customer cancels the order fully or partially, and the merchant agrees to refund.

• Merchant initiates cash back to the customer.

Reversal: Reversal is a process where a customer transaction is not successful; however, the amount is debited from the customer’s account, and a reversal is initiated by the merchant/acquirer/network instantly.

11. What to do when a customer reaches for a refund of additional/unknown debit for the same transaction?

In case of any additional debit or credit for the same transaction, it needs to be analyzed, and a chargeback is raised if needed.

12. What is the maximum TAT for the merchant to claim for a settlement process?

• T+30 days for an international settlement process.

• T+5 days for all domestic transactions (Visa, Mastercard & Rupay).

Note: If the network allows the merchant to claim the settlement beyond the TAT, M2P can raise chargeback as late settlement.