Chargebacks

[ { "title":"Testing", "link":"https://docs.solidgate.com/payments/testing/", "text":"Simulate payments to test your integration before launching in production.", "imgSrc":"https://solidgate.com/wp-content/uploads/2022/06/icon-customizable.svg" } , { "title":"Create your payment form", "link":"https://docs.solidgate.com/payments/integrate/payment-form/create-your-payment-form/", "text":"Understand how to integrate the payment form into your product.", "imgSrc":"https://solidgate.com/wp-content/uploads/2022/06/icon-payments.svg" } , { "title":"Subscriptions", "link":"https://docs.solidgate.com/subscriptions/", "text":"Create and maintain a stable and healthy business subscription model.", "imgSrc":"https://solidgate.com/wp-content/uploads/2022/06/icon-global.svg" } ]

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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:

  1. Customers file chargeback requests with their card-issuing banks.
  2. If the issuing bank deems the request valid, it reverses the transaction and temporarily credits the customer's account.
  3. 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.
  4. Solidgate informs the merchant of the chargeback and provides an opportunity to dispute it by submitting evidence that supports their case.
  5. 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.

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

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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": 7.487115236108244e+22
  }
}

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
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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.

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.

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

  1. Accept the chargeback request.
  2. 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.

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

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 the nature of your chargebacks and effectively manage them. reason code and a detailed description for each chargeback. These reason codes are particularly useful for analytical and segmentation purposes.

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
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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 support@solidgate.com. 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 19 pages.
  • 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.