Things you should know about Chargebacks

Things you should know about Chargebacks.
What is a Chargeback?
Chargeback is a dispute raised by a cardholder directly from their bank for the return of
payment or reversal of a credit card transaction. It is very different from that of return of sale
as this comes directly from the cardholder's bank and is processed via the Payment
Gateway to the merchant.
Chargebacks were brought into the picture to protect the buyer from businesses selling
subpar products or services or performing unethical activities.
Difference between a Chargeback and Refund.
Although from the customer's point of view it seems to be the same. But from a merchant's
point of view, the chargeback comes with the additional fee along with the product or service
cost amount. In refund, a merchant directly refunds the amount to the customer using his
merchant account, whereas in chargeback the issuing bank presses the administrative
charges.
3 Types of Chargebacks / Fraud
1. True fraud
Under this category, unauthorized transactions take place. The cardholder is
completely unaware that the card is used to benefit products or services, this means
theft has occurred. Here when the cardholder files a chargeback it results in
discontinuation of the credit card number first and a new card with a new number is
issued.
In this case, the cardholder is encouraged to approach their bank first rather than
getting in touch with the merchant to resolve the issue.
2. Chargeback fraud
Here the cardholder is a deceitful customer having ill intent. He is trying to get away
with that, which is by not paying for a product or a service that they have truly
ordered or purchased. The cardholder's ill intent is the reason behind the
chargeback.
Even though the business has rightfully delivered the products or catered the
services as described, the consumer will file a chargeback dispute so that he/she can
avail of it for free and not pay for it. Business owners have to then play defense by
proving their case in the process. This in reality is daunting because the cardholder is
unethically trying to take advantage of the protection policy and going against the
very nature or reason behind bringing this policy into existence. The policy is
supposed to provide protection but they’re abusing it.
3. Friendly fraud
The cardholder issues a chargeback due to an honest mistake. The cardholder
issues chargeback with no malicious intent. It could be due to common, honest
mistakes or errors like forgetfulness, being unclear of what they purchased, not
recognizing a charge, delays in shipping, or the consumer not receiving a product
along with many other scenarios, here’s a quick shortlist of why chargebacks could
occur.
Not receiving the item
Received incomplete/partial item.

Damaged item or not in compliance with description
They thought they were billed the incorrect amount
Child making purchase on parents credit card without their knowledge
Forgot about the purchase or someone else was authorized to use their credit
but didn't tell them.
Friendly fraud is mainly related to miscommunication or misinformation on either or both
parties.
The chargeback process is made to favor the customer so you should necessarily know the
process and best equip yourself before keeping your side safe and winning a dispute when
you are caught in a chargeback situation. Presenting basic documents is enough and can
help you win, additionally, you must gather as much information about the customer as
possible at the point of purchase to prevent and protect yourself in future chargeback
situations. By doing this step you are ensuring that you gather proofs if required to present.
Chargeback Process
1. The cardholder calls their bank
The customer calls their bank to initiate and file the chargeback and states their
reason for doing so. And while filing they attach their evidence to support their claim.
2. Bank Review
In this step, the bank reviews the application submitted and verifies its legitimacy and
depending upon the results approves or rejects the issues disputed as an invalid
disputes.
3. Credit of amount
The cardholder bank on approval gives credit to the consumer on their credit card
immediately.
4. Issuing chargeback to the card network
The fourth step includes formally issuing chargeback to the credit-card networks and
a fee is also charged.
5. Receiving chargeback
The merchant account processor (acquirer) receives the chargeback and notifies the
business via Payment Gateway and other dedicated communication channels. It
requests the merchant to display the proof of purchase. This is the right place where
a business owner can submit his records as evidence of purchase. Here’s a list of
proof you can provide,
Printed receipt
Signed contract
Transaction details from merchant’s portal
Stamp verifying date and time of purchase.
Signature of cardholder
6. Choice of business owner

Here the business sometimes just lets go of the chargeback, the process ends but
also at the same time the business owner is found at fault.
If the owner chooses to reply then will be required to provide proof of purchase to
fight against the chargeback
7. Submission of documents
The business owner or the merchant then provides the documents displaying proof of
purchase to the card-issuing bank.
Upon the result of a dispute in whose favour it is cardholder or merchant, either party can file
a chargeback if not satisfied with the results, only if you have strong supporting documents
otherwise it will result in a huge penalty.
Conclusion
The robust, effective payment gateway can help any business to prevent chargeback
to a considerable amount along with the smooth functioning of payment transfers.
Radiant Pay is a leading Payment Solution Service Provider that understands your
needs according to the type of business you deal in and offers you suitable services.