What is a chargeback?
A chargeback is a payment dispute that occurs when a cardholder asks their card-issuing bank to reverse a transaction. They are designed to protect consumers from fraudulent transactions but can occur for a variety of other reasons such as non-delivery of a product or service, issues with quality, products or services not being as described, or refunds not being processed in a timely manner.
What happens when a chargeback occurs?
When a consumer initiates a chargeback with their card-issuing bank, the bank will begin an investigation into the alleged fraudulent activity:
- The funds associated with the disputed transaction are collected from your merchant account.
- A dispute fee is also charged to your merchant account.
- As the merchant, you are required to provide evidence that the transaction was legitimate.
- The card issuer will review the supplied evidence and make a decision.
- If the card issuer rules the dispute outcome in your favour, the funds (including the dispute fee) are returned to your merchant account.
Arriving at the resolution can be a complicated and time-consuming process, often taking several weeks or even months to resolve – it is at the discretion of the issuing bank.
How Mint supports you when chargebacks occur
Mint provides merchants with support should a cardholder issue a payment dispute against you with our chargeback management process. This supports you to efficiently receive, manage, and respond to disputes by working hand-in-hand with you on chargeback responses. Mint will also work with you to implement ways to help keep your rate of chargebacks low, including the use of in-house transaction monitoring and Mint’s 3D Secure (“3DS”).
3DS is available for all merchants and provides an additional layer of security for online card transactions. This helps to minimise fraudulent online transactions and shifts the risk from you (the merchant) to the card issuer.
Reach out to the Mint team if you would like to discuss implementing 3DS or find out more
What to include in your chargeback response
Every day, card issuers examine hundreds of dispute answers, this is why is it critical to keep your response clear, concise, and relevant to the chargeback reason, and include supporting evidence.
For example, if a dispute alleges that the consumer never received the product or service it is not relevant to present proof of your explicitly stated refund policy.
Proof of Customer Authorisation
Evidence of customer authorisation could include:
- Signed receipts or contracts.
- 3DS if applicable.
- AVS (Address Verification System) matches
- CVV (Card Verification Value) confirmations
- IP address that matches the cardholder’s verified billing address
Proof of Product or Service Delivery
Providing proof that services have been delivered can be more challenging than for physical products. Proof of service could include:
- Confirmation from the supplier of flights/ tickets issued, the hotel or tour booking.
- Proof of payment to the supplier for the services – this could include the
- Invoice/ receipt issued by the supplier
When using any of these as proof of service, you should ensure that they show the details of the travellers, services, and booking number.
In cases where the chargeback reason relates to goods not being delivered, present evidence such as shipment tracking information, delivery signature, and/ or photo proof of delivery. These should demonstrate that the items were shipped and delivered in a timely manner, and in line with the service levels set out on your website or in T&Cs.
Product Descriptions
Sometimes customers initiate a chargeback because they’re unhappy with the quality of the product or service provided, or because the description does not match the reality.
To avoid this type of chargeback, make sure the services and products you sell match the descriptions provided on your website, or in brochures.
Include a Copy of your Terms of Service and Refund Policy
The fine print is important in payment disputes. It's crucial to show that your consumer accepted and understood your terms of service at the time of purchase, or didn't follow your rules when it comes to returns or refunds. It is not sufficient to just offer a written copy of your terms of service or other rules; a clear screenshot of how you display them at checkout is a valuable addition to your proof.
For travel bookings, your customers will agree to both your terms of service, and the terms of service for the providers you are booking them with. You should therefore include both your terms of service and the terms for the relevant providers as well. In addition to this, you may charge an administration/ cancellation fee or similar, you should ensure that this is outlined in your T&Cs and specify if this is in addition to a similar fee from providers.
Combine Files of the Same Evidence Type
For instance, merge any elements (email messages, text screenshots, phone transcripts, etc.) that indicate communication with your customer into a single file.
Disputes on partially refunded payments
A client who has already received a partial refund (for instance, a return of a reduced sum that was agreed upon) can contest a payment for the whole amount. Although card issuers are more than keen to make amends, we recognise this can be irritating because it leaves you liable for the partial refund you've already processed and the full amount that is being contested.
It's crucial for you to provide proof of the partial refund in your response, even if you intend to accept the unrefunded component of the dispute. This should contain the refund's amount and date as well as a snapshot of the data from your Dashboard (this is referred to as a "credit issued" response). The card issuer often cancels the initial dispute and then initiates a new one for the adjusted amount.
Disagreements around partial refunds can sometimes occur in a range of scenarios. One of the most common can be when the sale amount is refunded less a cancellation or administration fee that applies either from yourself, a provider (in the case of travel bookings for example), or both.
How to Minimise your Risk of Chargebacks
While it is not possible to entirely eliminate your risk of chargebacks, there are a number of things that you can do to minimise the chance of one occurring:
- Provide clear descriptions of your products and services.
- Provide clear terms of service or sale, including policies for refunds and reference to relevant provider T&Cs
- Process partial or full refunds, or credits in a timely manner and in-line with your T&Cs.
- Provide clear information on how customers can contact you with questions or issues following a sale.
- Respond to any communication professionally and promptly.
- If possible, implement additional security measures such as Mint’s 3DS which shifts the risk from the Merchant to the card-issuing bank.
- For physical products, use tracked shipping where possible.
Learn how Mint can help you prevent chargebacks with Virtual Cards
In addition to providing merchant services, Mint can also issue card payments. Payments received via card expose merchants to chargeback risk. To mitigate chargeback risk, agents can issue a Mint Virtual Card to a supplier and receive the same protection in the event of default or non-delivery of service.
Reach out to the friendly Mint team to explore how our platform enables your business to safely accept payments from customers, experience faster reconciliation, and reduce fraud with virtual card issuance, all in real time.
