Chargeback refers to a situation whereby a cardholder disputes a card transaction and tries to get their money refunded. In this case, the cardholder is able to request a chargeback directly to their issuing bank rather than to the merchant, and is generally able to raise a chargeback 6 months after purchase.
The chart below shows a typical tokenization flow.
The circumstances usually involves identity theft, unauthorized transaction, or fraud. Chart below provides typical scenarios for a chargeback and describes the process in dispute of a chargeback:
The merchant needs to contact the customer, and clarify regarding the chargeback reason, which can be either:
When a customer raises a chargeback to their bank, Xendit will get a notification from the acquiring bank about the chargeback. And we'll let you know about the chargeback details.
Chargebacks are a pain point when having cards as a payment option. There will always be some users who do not pay attention to their transaction details when checking out, and ends up submitting chargeback.
Here’s how you can prevent this from happening:
Generally, a cardholder can issue chargeback until H+120 from the date of transactions.
So, you've received a chargeback, what can you do about it? There are three possible actions that you can do:
When determining a judgement for a chargeback, transparency will prevent you from losing. Transparency means that you have recorded and maintained all interactions with the cardholder, details of the transaction, and anything that will confirm that the cardholder acknowledged/aware of the product that they were purchasing. Some examples of evidence that you can provide:
The evidence can be sent to email@example.com. The more relevant the evidence that you send, the more you are likely to win the chargeback. If Xendit does not have enough evidence that can support a successful reversal of the chargeback, we will request additional documentation. Certain period of time will be given (depends on the issuing bank) to submit all documentation to us.
If you've communicated with the cardholder, and they've agreed to cancel their chargeback, we'll need to submit a report to the bank, Xendit will need to have the following information:
Kindly download the form in the following link, and provide it to the cardholder. For the purpose of information privacy of the cardholder, please direct the customer to send it to firstname.lastname@example.org.
We'll use the information as evidence for the bank to cancel the chargeback.
This is the least favorable outcome, and we'd like to avoid this if possible. But here's what might cause you to lose a chargeback:
If the acquiring bank deems that the supporting evidence to be not enough, Xendit will be informed, and there would be additional time to gather more evidence.
The bank will review the evidence received and notify Xendit of the chargeback results. 3 chargeback results :
The bank notify Xendit regarding the results of chargeback maximum of 6 months after the date of sending merchant evidence against the chargeback to the Bank.
What's arbitration and how to fight it? After the first two steps of evidence verification from the bank, there is a possibility where the issuing bank deems the evidence to still be not enough. If so, the issuing bank can then raise the chargeback to arbitration. Xendit will be informed about the arbitration step, and you'll need to make the decision whether you want to challenge the arbitration or not. If you want to challenge, then we'll require to collect further evidence, send it to the acquiring bank, then the issuing bank. If you win, you'll win the chargeback. However if you lose, you'll have to pay for the chargeback and the arbitration fee ($500).
How do you know if you're facing fraud cases? There are several types of fraud that you might encounter in card transactions. Below are the types of fraud that are documented (so far).