Transaction Dispute and Chargeback Management

This article will cover the following four questions along with their respective descriptions or solutions.

 

1. What types of transaction disputes are there?

You may encounter credit card transaction disputes if you have enabled credit card payment. Transaction disputes typically involve cardholders disputing a charge with the issuing bank (issuer). Currently, credit card transaction dispute types mainly include retrieval and chargeback.

 

i. Retrieval

A retrieval occurs when a cardholder disputes a credit card charge and requests the issuing bank to inquire about the order details. The issuing bank does not immediately refund the disputed amount to the cardholder. Instead, the issuing bank notifies you through SHOPLINE Payments of the retrieval to be processed. You will need to gather evidence and forward it to SHOPLINE Payments as soon as possible. Otherwise, the retrieval may escalate into a chargeback.

 

ii. Chargeback

In most cases, for disputes related to credit card charges, cardholders would rather proceed directly to chargebacks than initiate retrievals with the issuing bank. If a cardholder initiates a chargeback with the issuing bank, the issuing bank will immediately freeze the disputed amount and simultaneously charge you a chargeback fee. The corresponding amount in your SHOPLINE Payments balance will also be frozen, along with the chargeback processing fee deducted. You need to collect order-related evidence and submit it to SHOPLINE Payments promptly for dispute resolution; otherwise, you may not receive the disputed amount.

 

2. How is a dispute processed?

When a cardholder contacts their issuing bank to dispute the payment to you for various possible reasons, a dispute arises. When they raise a dispute, the following procedure typically ensues:

 

i. Common procedures for handling retrievals

a. The cardholder raises a dispute with the issuing bank.

b. The issuing bank initiates a retrieval request. At this point, the issuing bank does not freeze the payment amount for this disputed order.

c. The issuing bank will request you to provide relevant information for the order through SHOPLINE Payments.

d. You need to gather evidence to prove the validity of the charges for that order and submit the evidence to SHOPLINE Payments.

e. Upon receiving your dispute response, SHOPLINE Payments will organize the documents you provided and then forward it to the issuing bank.

f. Once the issuing bank completes the review of the evidence, they will notify you and the cardholder of the outcome of the retrieval request.

 

2. Common procedures for handling chargebacks

a. The cardholder raises a dispute with the issuing bank.

b. The issuing bank initiates a chargeback request. At this point, the issuing bank will freeze the disputed amount for this order and immediately debit the chargeback fee.

c. The issuing bank will request you to provide relevant information for the order through SHOPLINE Payments.

d. You need to collect evidence to prove the validity of the charges for that order and submit the defense documents to SHOPLINE Payments.

e. Upon receiving your dispute response, SHOPLINE Payments will organize the documents you provided and then forward it to the issuing bank.

f. Once the issuing bank completes the review of the evidence, they will notify the cardholder and you of the results of the chargeback defense.

*Note: Regarding retrievals and chargebacks, SHOPLINE Payments will provide a channel for you to present your defense. Merchants are responsible for handling retrievals and chargebacks. SHOPLINE Payments is not involved in the decision-making of the defense results, and cannot guarantee a 100% success rate for defenses; the specific defense outcome is in the sole discretion of the issuing bank.

 

iii. Measures that merchants can take

You will receive email notifications from us regarding the disputes. Each dispute email includes order details of the disputed payment and specific reasons reported by the cardholder to the issuing bank for the dispute. You can resolve retrievals or chargebacks through the following measures:

 

A. Contact customers

You can communicate with the customer who placed the order via mobile or email to understand the reasons for the dispute and their needs. Try negotiating to see if the issue can be resolved. If the customer agrees to cancel the disputed order, they must contact their bank and inform the bank of their decision to waive the dispute. Meanwhile, they should provide you with a notice or proof of waiving the dispute from the bank. At this point, you need to submit evidence indicating that the customer has agreed to waive the dispute.

 

B. Provide more evidence favorable to the merchant's defense

When the cardholder's bank initiates a chargeback or retrieval, you need to submit relevant evidence within the time limit regulated by SHOPLINE Payments.

The type of evidence you submit should be subject to the reason for the cardholder's chargeback or retrieval. Make sure that your evidence is valid. This includes evidence related to customer authorization, shipping information for the transaction's products, and other relevant information. You may also include the Refund Terms and Return & Exchange Policy displayed on your website.

If your store is closed or temporarily suspended, and you receive a chargeback-related email that requires you to respond before the due date, please provide defense documents as specified in the email.

If you need to access more orders and customer info, you will need to pay the fee for the new plan to reopen your store. Upon reopening the store, you can view more details related to orders and customers. If you choose not to reopen the store, you can only submit basic transaction details related to the chargeback.

 

C-1. Regarding retrievals: Issue a refund

If you believe the reason for the cardholder's retrival is valid, you can arrange a full refund for the order to resolve the dispute. If you issue a partial refund, there is still a possibility of a full chargeback. However, if you issue a full refund, the cardholder will not be able to initiate a chargeback.

 

C-2. Regarding chargebacks: Accept

If you believe the reason for the cardholder's chargeback request is valid, you can accept the chargeback initiated by the cardholder. In this case, you do not need to submit any evidence. Simply reply to the risk control email stating your acceptance of the chargeback. As you waive the defense, the disputed amount will be refunded to your customer, and you will not receive the amount for that order. Additionally, once a chargeback comes about, a chargeback fee for that transaction will be debited from your SHOPLINE Payments account. Please refrain from processing refunds independently after a chargeback occurs to avoid duplicating the refund of the disputed amount.

 

 

3. What documents are required for various types of chargeback categories?

Each card issuer defines hundreds of specific chargeback codes, each representing a very detailed dispute cause. SHOPLINE Payments categorizes common codes of the issuers into 7 categories. This classification will better assist you in submitting the corresponding evidence.

 

i. Product/ service not received

Regarding chargeback orders related to non-received products, it is recommended that you first contact the customer to understand the situation. If a resolution is possible, kindly instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. Additionally, you will need to submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

How to prevent this: 

  • For physical products, promptly dispatch the goods upon receiving payment.
  • Provide customers with the most accurate estimated shipping and arrival dates for physical products, or offer tracking info from the logistics provider. If unexpected delivery delays occur, notify the customer in advance.
  • Retain the express delivery manifest, and for high-value products, consider having the customer sign upon receipt.
  • Provide customer service or support contact details for customers to easily reach out to you.

If an agreement cannot be reached with the customer to cancel the chargeback, the following info will be required:

  • The shipment date and time of the order
  • The payment information of the customer
  • The shipping address provided by the customer when placing the order
  • Delivery proof/ Signature proof of successful receipt to demonstrate that the products have been delivered to the shipping address
  • Any other information that is favorable to winning the defense

 

ii. Not as described

Regarding chargeback orders with discrepancies in the description of products, it is recommended that you contact the customer first to understand the situation. If a resolution is possible, kindly instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. Additionally, you will need to submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

How to prevent this:

  • Ensure that the descriptions displayed in ads, webpage promotions, and transaction receipts are accurate and complete, without any exaggerated or misleading descriptions.
  • With regards to shipping physical products, please ensure that the packaging and shipping methods can protect the products from damage during the transportation process.
  • During the after-sales process, do not shift responsibility, or cardholders may directly consult product manufacturers or logistics providers to resolve issues. The sellers are in effect held accountable for the product's quality, and the sellers must proactively address and resolve problems.

If an agreement cannot be reached with the customer to cancel the chargeback, the following info will be required:

  • The shipment date and time of the order
  • The payment info used by the customer
  • Delivery proof/ Signature proof of successful receipt
  • Proof of the products in the store matching the description or images provided
  • Any other information that is favorable to winning the defense

 

iii. Credit not issued (Refund not processed)

Regarding chargeback orders where refunds have not been processed (i.e. customers claim to have returned the products or cancelled the transaction, but you haven't issued a refund), it is recommended that you contact the customer first to explain the situation. If a resolution is possible, kindly instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. Additionally, you will need to submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

How to prevent this:

  • Make sure that there are highlighted reminders in the return, exchange, or cancellation policy, or disclose them explicitly to customers before they place an order.
  • When a customer requests a full or partial refund in accordance with your terms of service, it is essential to promptly fulfill your policy, especially when the request is reasonable. 

If an agreement cannot be reached with the customer to cancel the chargeback, the following info will be required:

  • The store's refund or return/exchange policy
  • The email or notification sent by the store to the customer explaining the refund policy
  • The reasons why the customer is not entitled to a refund
  • Any other information that is favorable to winning the defense

 

iv. Duplicate

Regarding chargeback orders related to duplicate charges, if the charges are legitimate, it is recommended that you communicate with the customer and kindly instruct them to contact the issuing bank to explain the intent to waive the chargeback. In such cases, you must submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

How to prevent this:

  • If there are accidental multiple charges to the customer's credit card during the payment collection, promptly refund the additional amount.
  • Send and explain receipts for each payment transaction, making it easy for customers to distinguish the reasons for each payment made.

If an agreement cannot be reached with the customer to cancel the chargeback, the following info will be required:

  • Explanation about the causes for multiple charges
  • Displaying receipts where multiple charges are for different products.
  • Any communicational evidence that informs customers of the details of these charges.
  • Any other information that is favorable to winning the defense

 

v. Unrecognized

Regarding unrecognized chargeback orders, where customers claim they cannot identify the transaction details on their credit card statements, and sometimes, customers may forget that they made a purchase or that a friend or family member made the purchase on their behalf, it is recommended that you communicate with the customer first. If a resolution is possible, instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. In such cases, you must submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

How to prevent this:

  • Ensure that customers can easily identify your billing descriptor, reflecting the website or merchant name where they made their purchase.
  • Send the receipt shortly after the payment is made so that customers can recall the charges they have paid.

If an agreement cannot be reached with the customer to cancel the chargeback, the following info will be required:

  • The shipment date and time of the order
  • The payment info of the customer
  • Customer's IP address and country/ region
  • Delivery proof/ Signature proof of successful receipt
  • Any other information that is favorable to winning the defense

 

vi. General

Regarding generic types of chargeback orders, it is recommended that you contact the customer first to understand the cause. If a resolution is possible, kindly instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. In such cases, you must submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

If an agreement cannot be reached with the customer to cancel the chargeback, the following information will be required. Failure to do so will result in the assumption that you accept the chargeback and the disputed amount will be refunded to the cardholder:

  • Detailed information about the purchased product
  • The shipment date and time of the order
  • The payment information of the customer
  • Customer's IP address and country/ region
  • Emails or other communications between the store and the customer
  • Delivery proof/ Signature proof of successful receipt
  • Proof of refund or return/ exchange for the existing orders
  • Any other information that is favorable to winning the defense

 

vii. Fraudulent (Unauthorized)

Regarding fraudulent chargeback orders, where customers claim unauthorized charges, it is recommended that you communicate with the customer to confirm whether there might be circumstances of the customer forgetting about the order or if it was placed by a friend or family member. If a resolution is possible, kindly instruct the customer to contact the issuing bank to explain the intent to waive the chargeback. In such cases, you must submit evidence of the customer's agreement to waive the chargeback, such as email communication between the customer and the issuing bank or a chargeback cancellation mail from the issuing bank.

If you believe the customer is mistaken or not truthful, you have to provide the following information:

  • The shipment date and time of the order, along with the delivery address
  • The payment info of the customer
  • Emails between you and the customer
  • The order's IP address and country/ region
  • Delivery proof/ Signature proof of successful receipt
  • Any other information that is favorable to winning the defense

 

 

4. How to prevent fraudulent transactions?

Transactions not authorized by customers, termed as fraudulent transactions, may result in chargebacks, causing you losses. It is essential to scrutinize the transaction orders for any unusual aspects during the transaction process and take appropriate measures accordingly. Below are some scenarios you should be aware of or solutions that you can refer to:

 

i. Despite orders placed by different customers, the products are shipped to the same address in the same country

In cases where orders are placed through different IPs, user names, email addresses, and regions but are sent to the same shipping destination, there is a high possibility of fraudulent orders. You can use the information on the invoice to contact the customer and determine if it's a fraud case.

 

ii. Orders with much larger transaction amounts than usual

If the amount of an order you receive is significantly higher than the usual level, you should verify the customer's identity and gain a simple understanding of the actual reasons behind this large-amount transaction. Through conversations with the customer, if you find that the customer's needs lack logical coherence or if there are even some unreasonable explanations, it is necessary to remain vigilant.

 

iii. Verify if the IP address matches the shipping address

The IP address used by a fraudster when placing an order may not match the shipping address. In such cases, you can use Google Maps and IP lookup websites such as WhatIsMyIP.com to check the validity of an IP address. You can examine the geographical location of the shipping address and the IP address, and if there is a significant distance between the two addresses (e.g. different countries), you need to be more vigilant. Of course, for items purchased as gifts or on behalf of others, different addresses may be used in the order.

 

iv. Orders that contain high-value products that are easy to resell or monetize

For electronic products, especially branded ones, they are more likely to be resold or monetized. Stores selling such high-value products are more prone to fraudulent attacks. Under such circumstances, you can also inquire about the order through a phone call by asking simple questions to see how the customer responds. This may include verifying the shipping address on the order and confirming details such as phone numbers and full names.

 

v. Orders with delivery requests labeled as "Urgent" or "Within 24 hours"

When fraudsters are not concerned about shipping costs, they often request "Urgent" or "Within 24 hours" delivery, and at such times, caution should be exercised. For physical items, it is generally advisable to delay shipment by 24 to 48 hours. This delayed shipping time allows the cardholder the opportunity to notice and report fraudulent activities on their account. Under such circumstances, while you may still receive fraud dispute reports, at least you won't lose the products.

 

vi. Search for and validate the email address

Searching for an email address on Google or other search engines can reveal whether there are records of attempts of that email address being used to commit fraud. You can also find social media posts or other info that links customers to their email addresses.

 

vii. Call the phone number on the order

Fraudsters often use invalid phone numbers. If someone answers the phone, ask them some simple questions about their order to see how they respond. For example, do they know the address, phone number, email, and name they provided? Are they making an effort to provide you with some basic information? When facing potential fraudulent orders, do not ship the products immediately. Confirm with the customer that the transaction is legitimate (remember to keep a record of the conversation) before proceeding to the shipment.

 

 

 

 

 

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