Chargeback

A chargeback is the reversal of all or part of a card transaction that the cardholder’s issuer sends back through the merchant’s acquirer, under the card network’s dispute rules, after the cardholder disputes the charge.

How it flows. Visa describes a dispute as the issuer reversing a transaction’s value to the acquirer, which usually passes it on to the merchant. The cardholder contacts their issuer, the issuer raises the dispute, and the acquirer asks the merchant to accept it or refute it with evidence. Mastercard’s dispute cycle has named stages:

1. First presentment. The acquirer submits the original transaction.
2. Collaboration. Before a chargeback is processed, the acquirer can be alerted and resolve the dispute with the merchant.
3. First chargeback. Funds move from the acquirer to the issuer, for the full amount or less.
4. Second presentment. The acquirer contests the chargeback, and funds move back.
5. Pre-arbitration and arbitration. If the parties still disagree, Mastercard decides who is financially responsible.

Reasons. Visa groups dispute conditions into four categories: fraud, authorization, processing errors and consumer disputes. Consumer disputes include conditions such as merchandise or services not received, cancelled recurring transactions and credit not processed. Visa’s guidelines say that if the merchant cannot remedy a valid dispute, the loss is the merchant’s, and the acquirer covers it if the merchant’s account cannot.

Chargeback and refund. A refund is started by the merchant, a chargeback by the issuer. Doing both for the same charge pays the customer twice. Stripe, for example, fails a pending refund when the customer disputes the charge in the meantime, and recommends answering the dispute instead.

For agent purchases. When an agent buys, the dispute question becomes whether the person authorized that agent to make that purchase. AP2 says its Checkout and Payment Mandates, with their receipts, can be brought together as a non-repudiable record of the transaction at dispute time, while leaving retention and retrieval rules out of scope. Visa Intelligent Commerce collects the user’s original instruction and the details of each authorized purchase as signals meant to help resolve disputes.

Neighbouring terms. Dispute resolution covers the wider process, including statutory consumer rights.