New Transaction Dispute and Chargeback Management (HK) – SHOPLINE Help Center

In cross-border e-commerce transactions, a "disputed transaction" generally refers to a situation where a cardholder (customer) questions a specific transaction shown on their credit card statement and formally raises a dispute through their issuing bank. Through this process, the issuing bank submits the dispute to the merchant, requesting that the transaction be reversed and the amount refunded.

As explained in the Consumer Council's guidance on credit card refund protection, chargeback protection is a consumer protection mechanism provided by international card schemes (such as Visa and Mastercard). This mechanism is governed by contractual arrangements between the card schemes, issuing banks, and acquiring banks. Under certain circumstances, cardholders are entitled to request the cancellation of a disputed credit card transaction and have the relevant amount forcibly refunded.

In Hong Kong, relevant regulatory authorities and the Consumer Council also issue guidelines to remind cardholders how to file complaints in accordance with applicable laws and regulations.

In simple terms, this mechanism can be understood as an "official arbitration mechanism" under the credit card payment system. It is governed by the rules of card schemes (such as Visa and Mastercard) and is designed to resolve payment disputes between customers and merchants. Key points include:

Initiation: The dispute is initiated by the cardholder through their issuing bank.
Formal process: This is not merely a customer complaint, but a formal procedure conducted in accordance with card scheme rules.
Impact on merchants: If the dispute results in a chargeback, the merchant will not only lose the transaction amount but will also be charged a chargeback handling fee to compensate the banks' processing costs. Excessive chargebacks may harm the merchant's reputation, result in higher processing fees, and may ultimately lead to the suspension or termination of payment services.

This article will cover the following:

What types of transaction disputes are there?
SHOPLINE's role in the chargeback mechanism
How is a dispute processed?
What documents are required for each chargeback category?
How to prevent fraudulent transactions?

1. What types of transaction disputes are there?

If you have enabled credit card payment methods, you may encounter credit card transaction disputes. A transaction dispute generally occurs when a cardholder raises a question regarding a specific charge with the issuing bank. The dispute handling process consists of multiple stages. Common types of disputes include retrieval, pre-chargeback, and chargeback. In some cases, chargeback disputes may further proceed to pre-arbitration and arbitration.

i. Retrieval

A retrieval occurs when a cardholder has questions about a transaction and requests the issuing bank to obtain additional transaction information. At this stage, the issuing bank does not immediately refund the disputed amount. Instead, the issuing bank will notify you through SHOPLINE Payments and request that you provide relevant transaction evidence.

You are required to collect and submit the supporting documents to SHOPLINE Payments by the required deadline. Otherwise, the retrieval may be escalated to a chargeback.

ii. Pre-chargeback

A pre-chargeback is a warning notice issued by the issuing bank after a cardholder raises a dispute and before a formal chargeback is initiated. At this stage, the disputed funds are not immediately held or frozen. However, you are required to respond and take appropriate action within the specified deadline, such as issuing a refund proactively or preparing relevant supporting documents.

If no action is taken within the required deadline, the transaction may be escalated to a chargeback.

iii. Chargeback

In most cases, a cardholder may bypass the retrieval or pre-chargeback stages and initiate a chargeback directly.

Once a chargeback is initiated, the issuing bank will immediately place a hold on the disputed amount and charge you a chargeback handling fee. The corresponding amount in your SHOPLINE Payments balance will also be held, and the handling fee will be deducted (Please refer to: SHOPLINE Payments Terms and User Agreement － Section 8). You are required to collect the relevant order evidence and submit it to SHOPLINE Payments within the specified deadline to assist with the dispute response. Failure to do so will be deemed as acceptance of the chargeback by the issuing bank.

All refund requests related to chargeback transactions must comply with the rules established by the relevant card schemes, including time limits for filing requests and requirements to provide evidence showing that the dispute is valid (Please refer to: Hong Kong Monetary Authority FAQ – C9).

In general, cardholders are required to submit a dispute request to the issuing bank in writing or by phone within 180 days from the transaction date. The procedures and time limits may vary depending on the card scheme and the issuing bank. For example, in the case of Bank of Communications, a dispute refund request must be submitted within 60 days from the statement issuance date, and within 120 days from the date of settlement of the transaction (Please refer to: Bank of Communications – Credit Card Chargeback Protection).

For more details about accepting chargebacks, please refer to: ii-C-3. Chargeback stage.

iv. Pre-arbitration

Pre-arbitration is a formal stage in the dispute resolution process governed by international card schemes. This stage may be initiated when the issuing bank does not accept the evidence submitted by the merchant during the chargeback stage and requests the acquiring bank to initiate pre-arbitration within the prescribed timeframe. Alternatively, when a merchant disputes a chargeback and submits supporting evidence, the case may automatically enter the pre-arbitration stage in accordance with card scheme rules (this typically applies to certain Visa disputes related to fraud or authorization issues).

Pre-arbitration represents the final internal review opportunity before a case proceeds to arbitration. At this stage, you may submit additional and more compelling evidence in an attempt to persuade the issuing bank to reverse the chargeback.

No high arbitration fees are incurred at this stage. Pre-arbitration serves as an important buffer to avoid escalation to arbitration. However, if a specific card scheme charges additional fees during the pre-arbitration stage, SHOPLINE Payments will deduct the corresponding costs from your account.

Pre-arbitration is not a required stage in the chargeback process. In general, if you have accepted the chargeback during the chargeback stage, the dispute will not proceed to pre-arbitration.

v. Arbitration

If the dispute cannot be resolved during the pre-arbitration stage, either party may choose to submit the case to the relevant card scheme (such as Visa or Mastercard) for a final decision, which then moves the dispute into the arbitration stage.

You should carefully consider whether to proceed with arbitration. Arbitration is a high-cost process. The losing party will be responsible for the loss of the disputed amount and the arbitration fee. For more details, please refer to: iii. Dispute handling fees.

Therefore, before deciding whether to escalate a dispute to arbitration, you should assess the following:

Whether your evidence is sufficiently strong and persuasive.
Whether the disputed amount is significantly higher than the arbitration fee.
Whether you are willing to accept the risk of losing the disputed amount and having to pay the arbitration fee if the case is decided against you.

An arbitration decision is final and binding, and the losing party must comply with it. It is strongly recommended that you communicate with the SHOPLINE Payments team and conduct a thorough risk assessment before deciding whether to proceed to this stage.

Summary

In the credit card dispute handling process, both retrieval and pre-chargeback are inquiry or early warning stages that take place before a formal chargeback is initiated. However, not all disputes go through these stages. In most cases, a dispute may proceed directly to a formal chargeback. During the retrieval and pre-chargeback stages, the disputed amount is typically not immediately held or deducted (although some pre-chargeback cases may involve a small handling fee). At these stages, you may still resolve the dispute by proactively issuing a refund or by communicating with the cardholder (customer), which may help prevent the dispute from escalating to a formal chargeback.

Once a formal chargeback is initiated, the disputed amount will be held or deducted through SHOPLINE in accordance with the issuing bank's requirements, and a corresponding chargeback handling fee will be charged. At this stage, you may still choose to accept the chargeback or submit supporting documents to contest it.

If you do not accept the chargeback outcome and have sufficient supporting evidence to pursue the case further, the dispute may proceed to pre-arbitration or arbitration. Pre-arbitration and arbitration are not required stages and will only be initiated when the parties cannot reach an agreement.

*Notes:

Both pre-arbitration and arbitration may involve processing fees.
Arbitration may result in significant costs, and the losing party will be required to pay the full arbitration fee.
Before proceeding to arbitration, consider whether the potential outcome is worth the costs involved.

2. SHOPLINE's role in the chargeback mechanism

When a cardholder initiates a chargeback, SHOPLINE Payments provides you with a channel to submit supporting documents for dispute response. We work closely with you and pass the evidence you provide to the issuing bank through our payment partners, so it can be reviewed as part of the chargeback decision.

The final decision on a chargeback is made by the issuing bank. SHOPLINE Payments is responsible for forwarding the supporting documents you provide to the issuing bank, but does not participate in the decision-making process. As a result, the outcome of a chargeback cannot be guaranteed.

If a chargeback dispute is unsuccessful and you do not agree to issue a refund to the cardholder (customer), you may choose to pursue the case further through the acquiring bank by submitting additional supporting information. In such cases, the dispute may proceed to the arbitration process governed by the relevant international card schemes.

Please note that arbitration involves significant costs. For details, please refer to: iii. Dispute handling fees. Arbitration fees are only refundable if the merchant wins the case. The possible outcomes are outlined below:

If you lose the case, you will be required to refund the disputed amount to the cardholder, and the arbitration fee will not be refunded.
If you win the case, the full transaction amount will be returned, and the arbitration fee will also be refunded. Please note that fees charged at other stages (such as chargeback or pre-arbitration handling fees) are non-refundable, regardless of the outcome.

If you decide to proceed with international arbitration, SHOPLINE will first deduct the arbitration fee. You will be required to provide the reasons for disputing the chargeback outcome, along with relevant supporting documents. All submitted materials must be translated into English in order to proceed with the arbitration process.

*Note: If a customer places an order using a foreign currency card, the refunded amount after a successful chargeback may change due to exchange rate fluctuations. A foreign currency card means a card where the settlement currency is different from the card issuer's local legal currency.

When a customer pays with a foreign currency card, exchange rates may change during the chargeback process. As a result, amounts may be recalculated at different stages. When a chargeback is initiated, the system holds the disputed amount based on the exchange rate on that date. If you win the chargeback, the refunded amount is recalculated again using the exchange rate on the decision date.

Exchange rate movements can work in both directions. They may increase risk, but they may also result in additional gains if the exchange rate moves in your favor. Amount calculation at each stage:

Order amount: Calculated based on the exchange rate on the payment date.
Chargeback initiation amount: Calculated based on the exchange rate on the chargeback initiation date.
Chargeback loss amount: Calculated based on the exchange rate on the chargeback loss decision date.
Chargeback win amount: Calculated based on the exchange rate on the chargeback win decision date.

Example

A customer in the United States places an order with Hong Kong merchant A for HKD 100.

Payment date: The customer completes payment in August. The exchange rate on that day is 1 USD = 7.5 HKD. The customer is charged USD 13.33. Merchant A receives HKD 100.
Chargeback initiated: The customer initiates a chargeback in September. The exchange rate on that day is 1 USD = 7.8 HKD. USD 13.33 is recalculated as HKD 103.97. The system deducts HKD 103.97 from merchant A's account.
Chargeback resolved in the merchant's favor: The bank rules in favor of merchant A in October. The exchange rate on that day is 1 USD = 7.9 HKD. USD 13.33 is recalculated as HKD 105.31. Merchant A receives a refund of HKD 105.31.
Summary: Merchant A first receives HKD 100. During the chargeback process, HKD 103.97 is held. After winning the dispute, HKD 105.31 is refunded. Because the exchange rate moves in merchant A's favor, there is no loss. Merchant A gains HKD 5.31, excluding any related fees. Exchange rates can move in either direction, which means gains are possible, but losses may also occur.

3. How is a dispute processed?

A transaction dispute arises when a cardholder (customer) contacts their issuing bank to question a charge that has already been paid. Depending on the stage of the dispute, the process may proceed as outlined below.

i. Common dispute processes

i-A. Common pre-chargeback process

A pre-chargeback is a warning notice issued by the issuing bank after a cardholder raises a dispute and before a formal chargeback is initiated. It is intended to give merchants an opportunity to address the dispute proactively.

The cardholder (customer) raises a dispute with the issuing bank.
The issuing bank issues a pre-chargeback notice. At this stage, the disputed amount is usually not frozen. In some cases, a small processing fee may be temporarily held.
The issuing bank notifies the merchant through SHOPLINE Payments.
The merchant may choose to issue a refund or prepare supporting documents to demonstrate that the transaction is valid.
If the merchant does not take action within the specified deadline, the dispute may be escalated to a formal chargeback.

i-B. Common retrieval process

A retrieval is a transaction information request initiated when the cardholder (customer) or the issuing bank has questions about the transaction details.

The cardholder (customer) raises a dispute with the issuing bank.
The issuing bank initiates a retrieval request. At this stage, the disputed amount is not frozen.
The issuing bank requests the merchant to provide relevant order information through SHOPLINE Payments.
The merchant gathers supporting documents to demonstrate that the transaction is valid and submits the materials to SHOPLINE Payments.
Upon receiving the response, SHOPLINE Payments forwards the submitted documents to the issuing bank.
After reviewing the evidence, the issuing bank notifies both the merchant and the cardholder (customer) of the retrieval outcome.

i-C. Common chargeback process

If a retrieval does not resolve the issue, or if the cardholder (customer) initiates a formal chargeback directly, the dispute will proceed as follows:

The cardholder (customer) raises a dispute with the issuing bank.
The issuing bank initiates a chargeback request. At this stage, the disputed amount is held for the order, and the chargeback handling fee is deducted immediately.
The issuing bank requests the merchant to provide relevant defense materials through SHOPLINE Payments.
The merchant collects supporting evidence to demonstrate that the transaction is valid and submits the defense documents to SHOPLINE Payments.
Upon receiving the response, SHOPLINE Payments forwards the uploaded materials to the issuing bank for chargeback review.
After reviewing the evidence, the issuing bank notifies both the merchant and the cardholder (customer) of the chargeback outcome.
The merchant may also choose to accept the chargeback to resolve the dispute.

The chargeback flowchart below is for reference only and is available in Traditional Chinese only:

i-D. Common pre-arbitration process

If the cardholder (customer) or the issuing bank does not accept the chargeback outcome, a request for pre-arbitration may be submitted through the acquiring bank.

The merchant is required to provide additional and more persuasive supporting evidence.
The issuing bank will review all submitted evidence again.
If the issuing bank accepts the new evidence, the original decision will be reversed. If the issuing bank maintains its original decision, the case may be escalated to the arbitration stage.

i-E. Common arbitration process

Arbitration is the final dispute resolution mechanism provided by international card schemes. The process is formal and involves higher costs.

If no agreement is reached during pre-arbitration, either party may request arbitration through the international card schemes.
The merchant must provide a complete explanation of the defense and all supporting documents. All materials must be translated into English.
The international card scheme will conduct a final review and issue a decision.
The arbitration decision is final and binding. The losing party must bear the disputed amount and the related arbitration fees.

*Note: For the retrieval, chargeback, pre-arbitration, and arbitration stages, SHOPLINE Payments provides a channel for submitting defense materials. Merchants are responsible for handling disputes and bearing the associated risks. SHOPLINE Payments does not participate in the decision-making process and cannot guarantee the outcome of any dispute. The issuing bank makes the final decision.

ii. Measures that merchants can take

When a transaction is disputed, merchants will receive an email notification from SHOPLINE Payments. You can also view the dispute details in your SHOPLINE Payments Admin. Each notification includes detailed information about the disputed order and the reason provided by the cardholder (customer) to the issuing bank. Depending on the stage of the dispute, you may handle the case using the following approaches.

ii-A. Contact the customer

You may contact the customer by phone, messaging applications, or email to understand the reason for the dispute and try to resolve the issue through discussion.

If the customer agrees to withdraw the dispute, the customer must contact their issuing bank to formally cancel the dispute. The customer must also provide you with proof of withdrawal issued by the bank, such as a confirmation email or other valid documentation. You should submit this proof as supporting evidence to complete the dispute withdrawal process.

ii-B. Prepare evidence to support your defense

Regardless of whether the dispute is at the retrieval, chargeback, pre-arbitration, or arbitration stage, you should prepare and submit relevant evidence within the specified deadline. The type of evidence should match the dispute reason. Common and effective supporting documents include:

Proof of customer authorization, such as signed orders, IP addresses, or device information
Proof of shipment, such as tracking numbers or delivery confirmation
Refund, return, or exchange policies and terms of service shown on your website
Communication records with the customer, or any other materials that may support your defense, such as surveillance footage or screenshots

If your store is closed or temporarily suspended, you may still respond to dispute-related emails within the required timeframe and submit available transaction information. To access full order or customer details, you will need to reopen your store, which may involve plan-related fees. If you choose not to reopen the store, you will only be able to submit the existing transaction information available to you.

ii-C. How to handle disputes at each stage

Go to SHOPLINE Payments Admin > [Dispute]. Click View to manage disputes.

ii-C-1. Pre-chargeback stage

Accept the dispute and issue a refund: If you agree with the dispute reason, you may proactively issue a refund to close the dispute. In most cases, no additional fees will be charged. However, in some situations, a pre-chargeback handling fee may apply, depending on the circumstances.
Reject to issue a refund: If you do not agree with the dispute reason, you may select Reject for the disputed transaction. This indicates that you choose not to resolve the dispute through a refund or other means. In this case, the dispute is likely to be escalated to a chargeback.

ii-C-2. Retrieval stage

Issue a refund: If you agree with the retrieval reason, you may issue a full refund for the order to resolve the dispute. Please note that issuing a partial refund may not prevent the dispute from being escalated to a full chargeback.
Contact the Online Merchant Success Team: If you believe the transaction is valid and do not need to issue a refund to avoid escalation, you may provide the required retrieval information instead. Please contact our Online Merchant Success Team to submit the requested materials for the retrieval.

ii-C-3. Chargeback stage

Accept dispute: If you agree with the chargeback reason, you may choose to accept the chargeback. In this case, no supporting documents are required. The disputed amount will be refunded to the customer, and the chargeback handling fee will not be refunded.
Challenge dispute: If you do not agree with the chargeback reason, you must submit supporting documents within the specified deadline. The final outcome will be decided by the issuing bank.

*Note: After a chargeback has been initiated, merchants should not issue a refund on their own through any method. This helps avoid refunding the disputed amount more than once.

How to submit defense documents

On the dispute details page, click Challenge dispute to open the evidence submission page. Enter the order information, including the logistics service provider, tracking ID, and shipping date. If you have additional information that helps demonstrate the validity of the transaction, upload it in the corresponding fields below. Examples include:

Customer communication records
Order details
Logistical details and delivery status

Please upload supporting documents that match the dispute reason and category to improve the chances of a successful defense. After confirming that all information is complete and the files are uploaded correctly, click Submit to proceed.

If your submitted defense documents are returned, please review the return reason and re-submit the materials within the specified deadline to avoid losing your opportunity to contest the dispute. If no response is received by the deadline, the system will treat the case as an acceptance of the dispute and refund the disputed amount to the cardholder (customer).

ii-C-4. Pre-arbitration stage

Accept dispute: If you do not wish to take on further costs or risks, you may choose to accept the previous chargeback outcome.
Submit additional defense documents: If you wish to continue the appeal, you may submit new supplementary materials through SHOPLINE Payments. This allows you to try to persuade the issuing bank to reverse its decision before the case proceeds to arbitration. For details on how to submit defense documents, please refer to the above section: How to submit defense documents.

ii-C-5. Arbitration stage

Proceed to arbitration: If you still do not accept the pre-arbitration outcome, or if you believe that an agreement with the cardholder (customer) cannot be reached, please contact the SHOPLINE Payments Online Merchant Success Team to proceed to the arbitration stage.

Arbitration usually involves higher costs. Please make your decision carefully. For more details, please refer to: v. Arbitration.

iii. Dispute handling fees

To ensure a professional and efficient dispute handling process, SHOPLINE Payments charges handling fees at different stages when a cardholder (customer) initiates a chargeback or when a dispute proceeds to arbitration. These fees are used to cover the costs of dispute investigation, coordination, communication, and arbitration procedures. The applicable fees are outlined below.

Pre-chargeback handling fee: Charged when a pre-chargeback case is successfully initiated. This fee is only charged if the pre-chargeback feature is enabled for your store.
Chargeback handling fee: Charged immediately when a chargeback occurs.
Pre-arbitration (second chargeback) handling fee: Charged immediately when a dispute enters the pre-arbitration (second chargeback) stage.
Arbitration handling fee: Charged immediately when a dispute is formally submitted to the relevant card scheme for arbitration.

Pre-chargeback handling fee (charged only if the pre-chargeback feature is enabled)	Visa (RDR) 120 HKD Mastercard (Collaboration) 185 HKD
Chargeback handling fee	120 HKD
Pre-arbitration (second chargeback) handling fee	Visa: 120 HKD Mastercard: 220 HKD Other card schemes: 0 HKD
Arbitration handling fee	4600 HKD

Refund rules:

Arbitration handling fee: If the merchant wins the arbitration, the arbitration handling fee will be refunded.
Pre-chargeback, chargeback, and pre-arbitration handling fees: These fees are necessary costs incurred during the dispute handling process and are non-refundable, regardless of the dispute outcome.

4. What documents are required for each chargeback category?

To help merchants handle credit card disputes more efficiently, SHOPLINE Payments groups commonly used card scheme chargeback codes into seven categories. Merchants should prepare and submit the appropriate defense documents based on the dispute category.

General handling recommendation

After receiving a dispute notification, you can first contact the customer to try to resolve the issue through communication. If the customer agrees to withdraw the dispute, the customer must submit a cancellation request to the issuing bank. You should then submit supporting proof, such as confirmation emails or a dispute cancellation notice, as evidence.

For disputes that cannot be resolved as described above, please refer to the document requirements for each category below.