What is a chargeback?

A "chargeback" is a way to reverse a transaction if a cardholder claims it to be illegitimate. Here, if the customer claim is found to be true, the issuing bank must refund the money to the customer. It also leads to reversal of the money flow back from the acquirer bank to the issuing bank, which eventually leads to a debit to the merchant's account.

What causes a customer to initiate a chargeback?

The customer may raise a chargeback against a transaction for various reasons. With each chargeback the issuing bank selects and submits a numeric reason code. Reason codes vary by bank network (Card association), but fall in four general categories:

• Technical: Expired authorization, non-sufficient funds, or bank processing error.
• Clerical: Duplicate billing, incorrect amount billed, or refund never issued.
• Quality: Delivered/Received goods not as promised at the time of purchase.
• Fraud: Consumer claims they did not authorise the purchase or identity theft.

Why should chargebacks be minimised?

Chargebacks not only lead to monetary losses, but also, lead to the loss of the related goods/services provided by the merchant. Also, If the number of chargebacks is high, the card associations (Like Visa/MasterCard/Rupay) impose heavy fines on the acquirer. To avoid this, the merchant's account may be discontinued.

What are some commonly used terms/definitions with chargeback?

• Retrieval request: An issuer may raise a retrieval request for a transaction receipt from an acquirer to validate that chargeback rights exist, to meet applicable chargeback conditions/rights and limitations, cardholder requests for records.
• Re-presentment: A re-presentment is used when the acquirer rejects a chargeback claim made by the issuer and sends the transaction back to the issuer. Re-presentment can be done on technical grounds as well as based on documents received from the merchants.
• Pre-arbitration/second chargeback: In case, the dispute has not been resolved in the first attempt, the aggrieved bank can approach Visa/Master for arbitration. If a card holder's dispute could not be resolved within the chargeback-representment - Second chargeback cycle, the aggrieved bank can go for a pre-arbitration or arbitration case filing with Visa/MasterCard.
• Pre-compliance: Pre-compliance is an attempt to resolve the dispute before filing for a compliance case. Compliance is a process where Visa/MasterCard resolved between members arising from violations of the operating regulations, when the requesting member can certify that financial loss has occurred or will occur for a specific amount and no chargeback right is available.
• Cardholder: A cardholder is an authorised user of Visa/Master/Rupay/Citrus cards.
• Merchant: GoKwik can be referred to as a merchant.
• Acquirer: An acquirer is a financial institution like banks that has contracts with "GoKwik" to accept various cards for payment of goods and services.
• Issuer: A card issuer is a financial institution that issues cards to end customers. For example: the bank to which card belongs can be called as issuer.
• Payment service provider (PSP): A payment service provider (PSP) contracts with an acquirer to provide payment services to a sponsored merchant. For example: Paytm, Billdesk, PhonePe, PayUMoney, Mobikwik.

Sample chargeback cycle

• First chargeback initiated by issuer: A cardholder writes a letter or fills out a "Dispute Declaration Form" and submits it to their credit card Issuing bank. The issuing bank then processes a chargeback along with the "Chargeback Documentation" (i.e. Cardholder letter) through the corresponding association (Visa or MasterCard) and thus is credited the disputed transaction amount. The acquirer or "Merchant Bank" then receives notification of the chargeback upon receipt of the "Chargeback Documentation" and is subsequently debited for the disputed transaction amount. At this point the acquirer internal database assesses the merchant a "Chargeback Fee". Acquirer's systems then run the chargeback through a series of simple filters to check to see if the merchant issued credit and for certain technical errors.
• Second chargeback initiated by issuer: Once a reversal (And the subsequent debit) is received back at the issuing bank, they will then forward the "Merchant's Letter" back to their cardholder for a response. If the cardholder wishes to pursue the dispute further, they then send in a "Rebuttal Letter" back to the issuing bank and if the Issuing bank feels that their response is valid, will submit a second chargeback. A second chargeback functions just like a first chargeback, except a chargeback fee is not assessed and the disputed amount is immediately debited out of the merchant's business checking account. The merchant is sent another letter explaining what, if any, documentation is required to pursue this dispute further. This "Second Chargeback" phase of the dispute is then considered "Resolved to the merchant" and will remain closed until the merchant responds back to the letter sent to them. If the merchant does indeed respond to the letter sent to them a "Second Reversal" phase of the dispute is opened.
• Issuing bank pre-arbitration phase: Once a reversal (And the subsequent debit) is received back at the issuing bank, they will then forward the "Merchant's Letter" back to their cardholder for a response. If the cardholder wishes to pursue the dispute further: 1. If the chargeback analyst deems the merchant's response as invalid, they will close out this phase as "Request Denied" and will credit the issuing bank back for the disputed amount and in turn debit the merchant's business checking account. The chargebacks analyst will also mail a letter to the merchant advising of the debit and will also explain why the chargeback cannot be pursued further at that time. If the chargeback analyst deems the merchant's response as valid, the acquirer will then send a form to the merchant requesting that they sign the form which makes the merchant liable for arbitration filing fees. If the merchant does not agree to the fees, the acquirer simply closes out the pre-arbitration phase of the case as "Unsuccessful" and will credit the issuing bank back for the disputed amount and in turn debit the merchant's business checking account. If the merchant does indeed agree to the fees and submits the signed form, the acquirer then responds to the issuing bank advising them that they do not agree with the cardholder's claim. The issuing bank then submits an arbitration request directly to Visa/Master.
• Arbitration: Arbitration is a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. In terms of chargebacks whenever the card issuer disputes a representation, or pre-arbitration response from the acquirer, the card issuer may file the arbitration with Visa/Master. In arbitration, Visa/Master decides which party is responsible for the disputed transaction.
• Intimation: When the acquirer intimates the merchant of the chargeback being in existence, write to support@gokwik.co