Chargeback
Chargeback is a dispute resolution mechanism in the payment industry initiated by a , resulting in the reversal of a transaction.
When a cardholder identifies an unauthorized or transaction on their statement, they can request a chargeback from their . The bank investigates the claim, and if deemed valid, the transaction amount is refunded to the cardholder, and the merchant incurs a chargeback fee.
Chargebacks can generally be classified into the following categories:
- Fraud – the cardholder claims the transaction was not authorized or the card was stolen, lost, or used without permission.
- Authorization – the transaction lacked proper authorization or was processed after authorization expired or was declined.
- Processing errors – mistakes in transaction handling, such as duplicate charges, incorrect amounts, or invalid account numbers.
- Consumer disputes – the customer claims they did not receive the product or service, it was defective, or it did not match the description.
Chargebacks also occur due to issues like undelivered goods, defective products, or dissatisfaction with services. While chargebacks protect consumers from fraudulent activities and unscrupulous merchants, excessive chargebacks can adversely affect merchants' reputations and financial stability. Managing chargebacks involves maintaining transparent communication, providing excellent customer service, and implementing fraud prevention measures to minimize disputes and protect cardholders and merchants within the electronic payment ecosystem.
