What is a Chargeback
- A chargeback (also called a payment dispute) is a reversal initiated when a cardholder asks their bank or card issuer to reverse a transaction.
- A chargeback can be requested for transactions dating back up to 120 days.
- See The Chargeback Process for details of the chargeback process.
- Chargebacks exist to protect cardholders but can also be used fraudulently against merchants.
- Understanding the process and maintaining proper records is key to preventing and minimizing chargebacks.
Common Reasons for Chargebacks
Chargebacks are typically raised for one of the following reasons:
- Unrecognised transaction - the cardholder does not recognise the charge on their statement.
- Duplicate charge - the transaction was processed more than once.
- Non-delivery - the customer's goods or services were not delivered as agreed.
- Defective goods -the goods were sold to or arrived in an unsatisfactory condition and did not align with the promised features.
- Refund not processed - the merchant agreed to a refund, but it was never issued.
- Fraudulent use - the card was used without the cardholder's consent or authorisation.
The Chargeback Process
When a chargeback is raised, the following process applies:
- Cardholder files dispute - The cardholder contacts their bank/card issuer to dispute the transaction.
- Issuer will contact Glimmer (Acquiring Bank)
- Glimmer notifies iStore Pay — informs iStore Pay of the chargeback and the reason code.
- Merchant notification — iStore Pay contacts the merchant via phone and/or email with the claim details and a request for supporting documentation (see Submitting Chargeback Documentation).
- Merchant response window — The merchant has 24hrs from the time of contact to provide the required documentation to iStore Pay.
- Documentation submitted to bank — iStore Pay forwards the merchant's evidence to Glimmer.
- Final deliberation -the issuer/bank and Glimmer engage in a series of discussions and reviews the evidence to reach a mutually agreeable resolution.
- Scheme ruling - If the issuer and Glimmer do not come to an agreement, the scheme makes a final decision, which needs to be upheld.
-
iStore Pay will communicate the ruling to the merchant
- The end-to-end chargeback process, from initial notification to final ruling, can take several weeks depending on the card scheme and the complexity of the dispute.
- Merchants will be notified in writing, via email, of the outcome of the chargeback.
- The timeline for the outcome of a chargeback varies on a case-to-case basis, but once a response is received this will be communicated to the merchant within 24hrs.
Merchant Liability
- If a chargeback is accepted (ruled against the merchant), the merchant is liable for the full value of the disputed transaction. This amount is deducted from the merchant's payout(s).
- There are no additional charges or penalties to the merchant however repetitive chargebacks could result in the merchant's account being terminated from iStore Pay.
- There are no partial settlements, chargebacks are always billed the full amount of the merchant's invoice.
- In unique circumstances, the schemes may fine the merchant, which will also be deducted from the merchant's payout(s).
Submitting Chargeback Documentation
When a merchant has been notified of a chargeback, the merchant must provide evidence relevant to the dispute reason and within the 24hr window provided.
Typical documentation includes:
- Signed invoice or proof of purchase
- Signed proof of delivery (for physical goods)
- Signed acknowledgement of service completion (for services)
- Communication records with the cardholder (emails, messages)
- CCTV footage
- Any other evidence that the transaction was legitimate and fulfilled
- Submission must be done via any of our Support Channels to the iStore Pay Team.
Protecting Your Business Against Chargebacks
Merchants can significantly reduce chargeback risk by maintaining thorough records:
- Invoices - keep invoices or records of purchases for every transaction to limit the risk.
- POD - if your business does deliveries, get a signed delivery slip for all shipped goods showing the customer has received their goods.
- Service sign-off - have your customers sign an acceptance letter when services are completed or performed.
- Communications — keep emails, messages, and any correspondence with the customer.
- Clear billing descriptors - ensure your business name on card statements is recognisable to customers to reduce "unrecognised transaction" disputes.
- Refunds - If you have agreed to a refund ensure that it's processed in a timely manner and follow up with your customer to ensure they have received it.