October 16, 2023

In the fast-paced world of e-commerce, understanding the intricate chargeback process is crucial for merchants. Chargebacks can impact a business's revenue, reputation, and overall success. To effectively manage and prevent chargebacks, you need to grasp each step of the process, from the initial alerts to thorough tracking.


Alerts and Their Significance

Every chargeback begins with an alert—a notification from the cardholder's issuing bank. These alerts typically signify that a cardholder disputes a particular transaction, raising concerns about its legitimacy.

Chargeback alerts can be triggered for various reasons, including:

  1. Fraudulent Transactions: Cardholders may report unauthorized or fraudulent charges.
  2. Merchant Disputes: Cardholders may disagree with the product or service they received, claiming it was subpar, not as described, or even non-existent.
  3. Processing Errors: Mistakes during payment processing can result in disputes.

The Investigation Phase

After receiving an alert, the cardholder's bank reviews the claim and assigns a reason code to the case. The reason code provides a brief explanation of why the cardholder disputes the transaction, such as fraud, service dissatisfaction, or an unauthorized purchase.

During this phase, the issuing bank investigates the cardholder's claim and determines whether it's valid or not. If the bank finds the claim unwarranted, the dispute will be voided.

The Merchant's Role

Once the issuing bank finishes its investigation, the merchant enters the scene. Merchants receive a chargeback notification and the accompanying reason code. They must review the chargeback to decide the best course of action.

Merchants have several options:

  • If the claim is valid, the merchant accepts the loss.
  • If the merchant can disprove the claim, they can re-present the chargeback.
  • Merchants can also decide to accept the chargeback and not contest it.

The Issuer's Final Say

The issuing bank takes into account any evidence provided by the merchant to make a final decision. If the merchant's evidence successfully refutes the cardholder's claim, the funds withheld during the chargeback process will be returned to the merchant. However, any chargeback fees or administrative costs will not be repaid.

Should the merchant's evidence fail to disprove the cardholder's claim, the transaction amount permanently shifts from the merchant to the cardholder, and the chargeback remains in effect.

The Role of Chargeback Alerts and Tracking

By monitoring and tracking chargeback alerts, merchants can gain valuable insights into their business operations. Chargeback alerts are not just a financial liability; they are also a source of data that can reveal patterns and issues that require attention.

Tracking chargebacks is essential for several reasons:

  1. Prevention: Regular monitoring of chargeback alerts allows merchants to identify recurring issues and address them promptly, preventing chargebacks before they occur.
  2. Identification: Tracking chargebacks helps pinpoint problem areas, whether it's a specific product, service, or customer.
  3. Resolution: Effective tracking assists in resolving disputes and improving the chargeback management process.

Chargeback Hero's Expertise

Chargeback Hero (CBH) provides e-commerce businesses with the expertise and innovative solutions needed to tackle chargebacks effectively. By combining technology, data analysis, and industry knowledge, CBH helps merchants prevent chargebacks and minimize their financial impact.

In a world where chargebacks can make or break an e-commerce business, understanding the entire chargeback process is invaluable. By staying alert to alerts and tracking the path from dispute to resolution, merchants can take proactive steps to protect their revenue and reputation.