An understanding of the chargeback process workflow is important. Once you are familiar with how the process works, you can manage chargebacks with a high return on investment.
Note
The chargeback process differs slightly for some Visa® disputes.
In any chargeback situation, there are five roles:
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The cardholder is a consumer who has been issued a credit or debit card. Unless the transaction is fraudulent, the cardholder is the person who makes the purchase.
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The issuer is the cardholder’s bank.
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The merchant is a business that has been approved to process credit and debit card purchases.
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The acquirer is the merchant’s bank.
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The card brand (Mastercard®, Visa®, etc.) acts as the go-between, facilitating messages and activity between the issuer and acquirer.
These parties play their roles during each stage of the chargeback process.
The chargeback process has five stages, all of which are made up of various tasks that must be completed before the case can advance to the next phase.
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Chargeback
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Chargeback response
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Pre-arbitration
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Pre-arbitration response
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Arbitration
Note
Usually, the chargeback process is finished after one or two phases. Occasionally, however, a case advances through all five stages (this is extremely rare for American Express® and Discover® disputes).
During the first phase of the chargeback process, the cardholder initiates the dispute and you are notified.
If you decide to respond to the chargeback — which we usually recommend — the process advances to the next stage.
When you respond to a chargeback, the case is sent back to the issuer for review. Based on the information provided, the issuer decides who is responsible for payment.
If the issuer decides in your favor, the cardholder might choose to dispute the transaction a second time, which would advance the case to the next phase of the chargeback process.
If the cardholder isn’t satisfied with the issuer’s verdict, the transaction is disputed again (this second dispute is technically referred to as pre-arbitration).
Again, you have a decision to make: accept the loss or continue fighting.
For collaboration disputes, we encourage you to accept liability if a case advances to pre-arbitration. We do not recommend that you continue fighting.
This is because we help you create the most compelling dispute response possible with all available evidence during the initial response. Unfortunately, if you respond a second time, your argument will not be any more compelling than it was the first time. This means a pre-arbitration response simply increases your costs without increasing your odds of winning.
Instead of using your resources to fight pre-arbitration cases, spend that time analyzing your chargeback data.
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What are the most common characteristics of winning responses?
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What elements are missing from responses that result in a loss or pre-arbitration?
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How can you optimize your response strategy so that you win more and lose less?
If you choose to continue fighting, you then send a pre-arbitration response to the issuer.
When you fail to accept liability during pre-arbitration, the issuer has the option to advance the case to arbitration.
Arbitration is the final phase in the chargeback process. The card brand assigns liability, and the case is closed.
The losing party must pay all arbitration costs and fees — which is usually a minimum of $520 per dispute — so carefully consider advancing a case to this stage.
During arbitration, the card brand reviews only the evidence you provided in the chargeback response. Anything shared in a pre-arbitration response is not considered. Again, if your argument was not compelling the first time, it might not be persuasive enough at a later stage.
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