Chargebacks

Manage chargebacks effectively to minimize losses and protect your business

A chargeback occurs when a customer files a complaint with their card-issuing bank, claiming that a transaction made with their card was unauthorized or there was an issue with the product or service they received.

Common reasons for chargebacks include fraudulent transactions, duplicate charges, or unsatisfactory goods or services.

In Solidgate, the chargeback process typically follows these steps:

Customers file chargeback requests with their card-issuing banks.
If the issuing bank deems the request valid, it reverses the transaction and temporarily credits the customer's account.
The acquiring bank (the bank representing the merchant) receives notification of the chargeback and debits the merchant's account for the transaction amount and any associated fees.
Solidgate informs the merchant of the chargeback and provides an opportunity to dispute it by submitting evidence that supports their case.
If the merchant’s evidence is sufficient, the chargeback may be reversed, and the funds returned to the merchant’s account. If not, the chargeback remains, and the customer retains the refund.

The chargeback amount can be greater than the original payment primarily due to fluctuations in currency exchange rates. This difference occurs when the exchange rates vary between the time of the original transaction and the issuance of the chargeback. Such variations can lead to confusion, especially for merchants unaware of these potential changes.

Chargebacks and dispute resolution

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Verifi CDRN

Verifi’s Cardholder Dispute Resolution Network (CDRN) provides a unique, patented process that integrates with top issuers to offer high-quality service for merchants and issuers in resolving disputed payments. It minimizes chargebacks and improves customer satisfaction by giving immediate notifications from issuing banks about cardholder issues, allowing merchants to address these issues before they escalate into chargebacks. CDRN temporarily freezes chargebacks for 72 hours, providing a window for resolution and response.

CDRN works as a closed-loop system that directly involves both merchants and issuers, fostering efficient communication and resolution. Merchants enrolled in the CDRN program receive alerts about potential disputes, allowing them to take preemptive action, such as issuing refunds or resolving customer queries, thus avoiding the chargeback process. This system not only reduces the occurrence of chargebacks but also helps maintain a healthy customer relationship by addressing their concerns promptly and effectively.

Verifi Order Insight

Verifi Order Insight is a tool designed to preemptively tackle disputes by providing issuing banks with real-time transaction data. This data includes critical information like delivery confirmations, purchasing device IDs, and records of customer support interactions, which help in linking the cardholder to the purchase and recognizing legitimate transactions.

By supplying detailed transaction information, Order Insight aids cardholders in recalling the transaction details, thus reducing instances of friendly fraud where a genuine transaction is mistakenly disputed. It also helps issuing banks in making informed decisions before registering a dispute, significantly cutting down unnecessary chargebacks. This proactive approach not only benefits merchants in reducing dispute rates but also enhances the overall customer experience by clarifying transaction details, leading to increased customer trust and loyalty.

Verifi Inform

Verifi Inform is a service that enhances the dispute resolution process by enabling issuers to send fraud alerts to merchants. These alerts provide early warnings about potential fraudulent transactions, allowing merchants to take necessary action quickly. Inform plays a crucial role in tracking fraudulent activities and expediting the dispute notification process.

By utilizing Inform, merchants gain the advantage of receiving quick updates on disputes, which is crucial for timely and effective chargeback management. The service aids in identifying and addressing fraudulent transactions at an early stage, thus reducing the financial impact on merchants. Additionally, it streamlines the communication between issuers and merchants, leading to a more efficient resolution process and maintaining a secure transaction environment.

Consumer Clarity

Consumer Clarity is a feature that provides cardholders with real-time access to additional transaction data on their online statements. This data helps in better understanding and recognizing their transactions, thereby assisting issuers in determining the legitimacy of a purchase.

The real-time display of detailed transaction data plays a critical role in reducing misunderstandings and clarifying transaction details for the cardholder. It helps in preventing disputes arising from unrecognized transactions, which is a common issue leading to chargebacks. By implementing Consumer Clarity, issuers and merchants can significantly reduce the number of disputes, thereby maintaining a healthier transaction environment and improving customer satisfaction.

Ethoca

Ethoca serves as an alert system for merchants, warning them about potential disputes through the global Mastercard network before they escalate into chargebacks. These alerts provide merchants with the opportunity to proactively address issues by refunding or resolving them, thus preventing chargebacks from occurring.

By receiving early dispute notifications, merchants can take immediate action such as issuing refunds, stopping shipping, canceling subscriptions, or other appropriate measures. This proactive approach not only reduces the likelihood of a chargeback but also minimizes the negative impact on the merchant’s account and reputation. Ethoca’s network coverage ensures that merchants are alerted in time to take necessary actions, thereby enhancing the effectiveness of their chargeback management strategy.

RDR

Rapid Dispute Resolution (RDR) is a proactive solution by Visa that prevents chargebacks at the pre-dispute stage. When enrolled in RDR, merchants can automatically refund disputed transactions before they turn into chargebacks, thus keeping their chargeback score healthy. RDR alerts do not require any merchant action and are marked as “resolved” in the notification.

The RDR system is linked to the merchant’s account through BIN and CAID, ensuring accurate alert reception and preventing false alerts from affecting the merchant. It features a powerful decision engine where merchants can set rules for automatic dispute resolution, such as refunding all RDR alerts or setting specific transaction amount thresholds for disputes. The system provides various parameters for rule customization, ensuring tailored dispute management and maximizing chargeback prevention.

Furthermore, RDR alerts are not counted in the chargeback rate, and no additional fees are imposed, making it a cost-effective solution for chargeback management. Merchants can use RDR in conjunction with CDRN to cover a broader range of issuers and maximize chargeback prevention.

VROL

VISA Resolve Online (VROL) is a web-based tool that facilitates efficient dispute resolution between issuers and acquirers. It offers a collaborative platform for exchanging information related to disputes, including chargebacks and retrievals. VROL enables tracking of dispute statuses, sharing of documentation and evidence, and secure communication among participants.

The tool streamlines the dispute resolution process by reducing the time and costs involved in managing and resolving disputes. It is accessible to authorized VISA issuers and acquirers, who can manage disputes for VISA-branded payment cards through this platform. VROL’s design focuses on enhancing the efficiency of dispute resolution, thereby contributing to quicker resolutions and improved relations between issuers, acquirers, and merchants.

Compelling evidence 3.0

Compelling evidence 3.0 is a feature that aids merchants in dispute prevention by providing robust supporting evidence for transactions. This tool is designed to potentially lead to more favorable resolutions in cases of disputes. It offers merchants a way to substantiate the legitimacy of transactions, thereby reducing the likelihood of unfavorable chargeback outcomes.

By utilizing Compelling evidence 3.0, merchants can present a stronger defense during the dispute process, improving their chances of winning chargeback disputes. This tool is particularly effective in providing evidence for digital transactions, where traditional proof of purchase might be lacking. It reinforces the merchant’s position in disputes, ultimately leading to better chargeback management and reduced financial losses.

Download the checklist to protect your revenue and keep your business thriving by avoiding costly fraud and chargeback.

Chargeback defense checklist & Subscription fraud

Chargeback`s structure

In Solidgate, the chargeback Webhook entity signifies the start of the dispute process, containing the chargeback type and chargeback flow.

Chargebacks sample

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"chargeback": {
  "id": 148812,
  "dispute_date": "2019-07-12",
  "settlement_date": "2022-07-10",
  "amount": 100,
  "currency": "USD",
  "reason_code": 10.4,
  "status": "reversed",
  "reason_group": "Fraud",
  "reason_description": "Fraud – Card-Absent Environment",
  "type": "2nd_chb",
  }
"chargeback_flow": {
  "id": 12345,
  "amount": 100,
  "dispute_amount": 0,
  "currency": "USD",
  "type": "2nd_chb",
  "status": "reversed",
  "date": "2022-07-10",
  "settlement_date": "2022-07-10",
  "updated_date": "2022-07-11",
  "deadline_date": "2022-07-12",
  "arn_code": "127011XXXXXX140503"
  }
}

The chargeback flow describes the stages of the dispute process, such as starting disputes, pre-arbitration, or arbitration, and appears as separate entities, akin to transactions within the order.

Types

Type	API name	Description
1st Chargeback	`1st_chb`	The customer initiates a transaction dispute with their card issuer.
2nd Pre-arbitration	`2nd_chb`	The issuer rejects your defense and initiates pre-arbitration.
Arbitration	`arbitration`	The issuer or cardholder disputes the merchant’s second presentment, moving the case to issuer network arbitration.

1st_chb

When a customer disputes a transaction with their card issuer, a chargeback is created. This is the merchant’s opportunity to challenge the chargeback request. The challenge involves providing evidence that the transaction is valid, not fraudulent, and that the customer is verified, and the service was provided.

A respective fee is applicable for each chargeback processing. Merchants should contact their account manager for information regarding the fee. It is essential to monitor and respond to these disputes as quickly as possible.

If the merchant is unable to provide proof before the chargeback deadline, compelling evidence should be sent to the Solidgate support team.

2nd_chb

If the card issuer declines the merchant’s defense to the cardholder’s inquiry based on the evidence provided, the merchant has two options:

Accept the chargeback request.
Challenge the chargeback request a second time and enter pre-arbitration.

This is known as the second chargeback or pre-arbitration. If the merchant or cardholder disputes the transaction a second time based on new evidence, the issuing bank can pursue this as a second chargeback, entering pre-arbitration.

arbitration

At this stage, the parties involved - the bank, cardholder, or merchant - are unable to resolve the dispute independently. A representative of the card scheme/network (e.g., VISA, MasterCard, Discover) is asked to intervene and make a judgment.

Fees will apply for the arbitration process. For example, in the case of a MasterCard chargeback arbitration, merchants will be required to pay a filing fee of $150, an admin fee of $250, a withdrawal fee of $150, and $100 in technical fees. Due to the high costs associated with these fees, merchants can benefit from disputing only very high-cost chargebacks. Consequently, in most cases, the arbitration process results in a net loss for the merchant, even if they win.

Statuses

Chargeback statuses indicate the different stages of the chargeback process, including investigation and resolution.

Status	API name	Description
In progress	`in_progress`	Solidgate has received the Chargeback. The merchant must decide to accept or defend against it.
Documents sent	`document_sent`	Solidgate has received and forwarded the supporting documents to the card scheme. It is no longer possible to change these documents.
Reversed	`reversed`	The merchant has successfully challenged the chargeback. The disputed amount is credited back, pending issuer review.
Accepted	`accepted`	This final status occurs if the merchant accepts the dispute or fails to send defense documents.
Resolved	`resolved`	The dispute is resolved at the pre-dispute stage through Proactive Dispute Resolution, not affecting the dispute ratio. Resolved disputes will not count against the dispute ratio (RDR status).
Resolved reversal	`resolved_reversal`	If a refund and RDR occur simultaneously, the chargeback is canceled to prevent double credit to the cardholder.

Receive chargebacks

To handle chargebacks in Solidgate, merchants can use the Solidgate API, Webhook, or HUB.

Via API

Solidgate's API provides detailed chargeback API reports tailored to specified date ranges.

To access these reports, merchants need to supply a Merchant ID, a signature, and the required dates formatted in UTC+0. The API also facilitates pagination, featuring a next_page_iterator field in the response, which enables retrieval of subsequent result sets.

The chargeback Webhook is designed to avoid duplicate event processing. This is achieved by making event processing idempotent. Merchants can accomplish this by logging each event ID and ensuring that events already logged are not processed again. Solidgate's Webhook offers comprehensive chargeback and order details through its header parameters and JSON response schema, aiding in efficient processing.

Chargeback and order statuses are determined using specific enumerated values. Additionally, the card scheme involved provides a Guide
Gain a better understanding of chargebacks nature and manage them effectively. reason code and a detailed description for each chargeback. These reason codes are particularly useful for analytical and segmentation purposes.

Via HUB

Within the Solidgate HUB , the Disputes section is a dedicated space for managing chargebacks and disputes.

This feature-rich section includes search options based on various criteria like order ID and customer email, enabling users to quickly find and access detailed information about disputes.

Moreover, the history feature in Solidgate HUB is an essential tool for tracking the progress of disputes and initiating necessary actions

Respond to chargebacks

If you have evidence confirming the legitimacy of a transaction or if the transaction amount is significant, you may choose to defend against disputes. Chargebacks post-refund can occur due to delays in the issuing bank’s system, customer-initiated chargebacks, discrepancies in refund amounts, or technical issues at the bank. To mitigate these, merchants can submit documentation for representment to prove a refund was issued. However, it’s vital to note that winning such a case still incurs a chargeback fee and affects the chargeback ratio.

To contest a chargeback, you should submit documents containing compelling evidence to the Solidgate support team. Failure to provide this evidence by the chargeback deadline will result in automatic acceptance of the dispute. The requirements for these documents are detailed below. Maintaining a low chargeback ratio is crucial for a merchant’s reputation and relationships, as high ratios can have adverse effects.

REQUIREMENTS FOR THE PREPARATION OF DOCUMENTS FOR DISPUTE:

EXAMPLE

The total quantity of pages within one case is no more than 19pages.
The format of all pages within one case should be either “portrait” format only or “landscape” format only.
All pages should be A4 size, other sizes do not acceptable.
Acceptable file format - DOCX.
For most chargeback/pre-arbitration/retrieval request decision provision – 11 days! After shown timeframe, the chargebacks and pre-arbitrations will be accepted (lost).
You could use the example of the document attached to create your evidence.

Compelling evidence *Please provide as much information as possible about the user below the text (screenshots of the agreements, customer's documents, proofs of using the product)

REASON CODE	DIGITAL PRODUCT OR SERVICE	PHYSICAL PRODUCTS
Fraud - card-absent environment Visa: 10.4 MasterCard: 4837 AMEX: F29 Discover: UA02	Description, date, and time of the products or services successfully downloaded. The evidence must also contain at least two of the following pieces of information: Customer's IP address and their device's geographical location at the time of purchase Device ID and name of the device Customer name and email address linked to their customer profile Evidence that the customer logged into their account for your business before the transaction date Evidence that your website or app was accessed by the cardholder for purchase or services on or after the transaction date Evidence that the same device and card used in the disputed payment was used in a previous payment that was not disputed Description of the digital goods and the date and time they were purchased and downloaded. Record of previous non-disputed payments.	Evidence such as photographs or emails to prove a link between the person receiving products and the cardholder If the products are collected from a physical location, you must provide: Cardholder signature on the pickup form A copy of identification presented by the cardholder Details of identification presented by the cardholder The address to which a physical product was shipped. The shipping address should match a billing address verified with AVS. You must also provide documentation as proof that a product was shipped to the cardholder at the same address the cardholder provided to you. The date on which a physical product began its route to the shipping address Courier's GPS location proving that product has been delivered
Merchandise/Service not provided Visa: 13.1 MasterCard: 4855 AMEX: F29 Discover: UA02
Duplicate processing/Paid by other means Visa: 12.6 MasterCard: 4834 AMEX: P08 Discover: DP	The charge ID for the previous payment that appears to be a duplicate of the one that is disputed. An explanation of the difference between the disputed payment and the prior one that appears to be a duplicate. Documentation for the prior payment that can uniquely identify it, such as a separate receipt. This document should be paired with a similar document from the disputed payment that proves the two are separate. Copy of invoice of two separate orders.	The charge ID for the previous payment that appears to be a duplicate of the one that is disputed. An explanation of the difference between the disputed payment and the prior one that appears to be a duplicate. Documentation for the prior payment that can uniquely identify it, such as a separate receipt. This document should be paired with a similar document from the disputed payment that proves the two are separate. Copy of invoice of two separate orders. A shipping label or receipt for the disputed payment.
Cancelled recurring transaction Visa: 13.2 MasterCard: 4841 AMEX: C28 Discover: AP	Any server or activity logs showing proof that the cardholder accessed or downloaded the purchased digital product. This information should include IP addresses, corresponding timestamps, and any detailed recorded activity. Your subscription cancellation policy, as shown to the customer. An explanation of how and when the customer was shown your cancellation policy prior to purchase. A notification sent to the customer of renewal or continuation of the subscription. Proof that notice of upcoming billing was sent to cardholder 10 days before transaction. Proof that the services were used between the billing date and the cancellation date. The Cardholder requested a cancellation for a different date and services were provided until this date.	Your subscription cancellation policy, as shown to the customer. An explanation of how and when the customer was shown your cancellation policy prior to purchase. A notification sent to the customer of renewal or continuation of the subscription, or an acknowledgment from the customer of their continued use of the product or service after the date they claim they cancelled the subscription. Proof that notice of upcoming billing was sent to cardholder 10 days before transaction. Proof that the cardholder did not return the merchandise.

Consider accepting the dispute in the following scenarios:

You lack the necessary information to address the chargeback reason code.
The transaction amount is too low to justify the effort in gathering compelling evidence.
The cost of the transaction does not outweigh the potential loss incurred from a second chargeback fee.
The transaction has been identified as fraudulent.
The customer has returned the goods, or there was a failure in delivering the goods.

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