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A Dispute occurs when a buyer asks their issuing bank to reverse a transaction that has already been cleared. This tends to happen mainly due to a card being used fraudulently or when a customer feels that their order was not fulfilled by the merchant. If the merchant should fail to respond to the Dispute, it will result in a Chargeback

How Chargebacks work

Step One - Dispute is raised
The process is triggered when the Cardholder logs a dispute with the Issuing Bank.

• The issuing bank verifies whether the dispute is valid or invalid.
• If the issuer views the dispute as invalid, the chargeback process will end at this stage.
• The cardholder will be notified of the decision.

Step Two - Dispute is logged
If the dispute is determined to be valid, or at least worthy of further investigation.

• The Issuing bank will assign a reason code and electronically transmit all the dispute data to the Acquiring bank.
• The cardholder will be issued with a temporary credit while the dispute is being investigated.

Step Three - Dispute is transmitted to the Acquiring Bank

• The dispute data is recorded and electronically transmitted to the Acquiring Bank,
• SLAs for the Acquiring bank to reply are triggered.

Step Four - The Acquirer receives the dispute
When the Acquiring Bank receives the dispute, they:

• Investigate the transaction details on the Card Association portal where the transactional log is stored,
• The bank then logs an incident on their system in order to keep track of the SLA to reply to the Issuing bank.

Step Five - Supporting evidence is requested from Merchant

• The Acquiring bank then requests the transaction re-presentment documents to be used as fulfilment of the dispute from the Merchant in writing; this request is a call-to-action for the merchant to gather and submit compelling evidence the remedy the dispute,
• The request consists of the transaction details, the reason for the dispute, what documentation to provide or how to deal with the dispute and the due date for the Merchant to reply.

Step Six - When the Merchant receives the dispute, the Merchant:

• Will assess the request,
• Collect the transaction evidence in accordance with the request,
• Submits the evidence back to the Acquiring bank.
• However, if the Merchant doesn't reply to the Acquirer in time; then they lose their re-presentation rights and therefore will be debited for the full value of the dispute and in addition, the Card Association will impose a chargeback fee.
• When the acquirer receives the merchant's evidence from the merchant, then they'll pass this along to the Card Association, which will be sent it to the Issuer, and then back to the Cardholder.