One of the lesser-known challenges faced by online merchants while accepting digital payments is Chargebacks. Whether you are new to online selling or an established eCommerce business, understanding the concept of Chargeback is essential for you to realize your long-term business goals, protect your revenue and maintain relationship with payment providers that
facilitate online transactions for you.
The below guide serves as a comprehensive knowledge base that tells you what Chargebacks are, how they work, what triggers them and how to manage them effectively. It covers everything right from the basics of Chargebacks to the exact evidence you need to win disputes.
What is a Chargeback?
Chargebacks are payment transaction reversals initiated by a cardholder's issuing bank on behalf of the cardholder when a specific payment appearing in the statement, is disputed. These are markedly different from reasonably due/legitimate refunds that originate from issues such as non-delivery, counterfeit products, fraud, etc.
The process of a Chargeback reversal is regulated by the operating card network - VISA, Mastercard, RuPay (NPCI), American Express, etc., that sets strict timelines, documentation standards and adjudication procedures. Adherence to all these rules are a mandatory requirement for CCAvenue as the payment aggregator and the merchant using its platform.
Difference between a Chargeback and Refund
A chargeback is payment reversal initiated by the cardholder's bank without the merchant's consent, and involves legal formalities such as application of fees, administrative burden, potential monitoring by card networks, and reputational impact.
A refund on the other hand is reversal of payment voluntarily undertaken by the merchant at the request of the customer, due to genuine reasons such as return of product, non-delivery, counterfeit items, etc.
Reasons for Occurrence of Chargebacks
- Cardholder has not received goods / services ordered.
- Refund not initiated by merchant even after agreeing to refund to the customer.
- Unclear billing descriptor where the cardholder does not recognize the transaction.
- Fraudulent or unauthorized transaction through usage of the card without the holder's knowledge.
- Product found to be defective or significantly different from the description.
- Cardholder charged twice for the same transaction.
- Subscription was cancelled but the cardholder with still charged.
Phases of a Chargeback Dispute
A Chargeback dispute is escalated to three stages with each stage having its own implication on your finances, time and strategy
Stage 1: Initial Dispute
At the cardholder's request, the issuing bank raises a formal dispute on behalf of the complainant. The disputed amount is then debited from the payment aggregator until further resolution. CCAvenue payment gateway then notifies the merchant with the reason code, disputed amount, and requirements for evidence. The merchant gets 5 calendar days to respond with
supporting documentation which CCAvenue further provides as evidence to the acquiring bank to represent your case.
Stage 2: Pre-Arbitration
In case the issuing bank rejects your application, it will further escalate the case for Pre-arbitration - a second chargeback with in-depth scrutiny. As an outcome, the merchant has to re-submit new or revised documents of evidence.
Stage 3: Arbitration
Either of the parties can request for arbitration or final decision in case the pre-arbitration phase is not resolved. The operating card network (VISA, Mastercard, etc.) or the NPCI's arbitration panel then makes a final legally binding ruling based on which the losing party has to bear the entire arbitration fee. This can range up to USD 500 per case for VISA
and Mastercard or INR 500 to 3000 for RuPay disputes. The arbitration stage is mostly pursued for high-value transaction disputes involving compelling evidence.
CCAvenue's Step-by-Step Chargeback Management Process
1. Chargeback notification
On receiving a chargeback notification from the acquiring bank, CCAvenue's Chargeback analyst downloads and logs the case with a unique case ID, and retrieves transaction details such as TID, MID, amount, 3DS authentication status, settlement status, etc. from the MCPG panel.
2. Merchant Notification (Day 0)
The team sends a chargeback notification email on the same day to the merchant's registered business email ID and to three additional email addresses listed in MARS. This notification will include details such as the reason code, disputed amount, required documents and submission deadline.
3. Collection of Evidence (Days 1-5)
On being notified, the merchant needs to either upload supporting documents through the Disputes module in MARS or share the documents via email in reply to the notification mailer.
4. Re-Presentment (Within 2 days of Receipt)
CCAvenue collects all the evidence, collates the files and submits it to the acquiring bank within the TAT window specified by the card network. In case there are not supporting documents received, a final notice is issued followed by a permanent debit from the account.
5. Status Follow-up (Day 75)
On completion of 75 days from the date of Chargeback, CCAvenue follows up with the acquiring bank for the final resolution status.
6. Case Closure
The final result of the case whether won, lost or pre-arbitrated is updated on the CCAvenue payment gateway portal, and communicated to the merchant. Won cases are closed with no financial impact whereas lost cases trigger the recovery workflow.
CCAvenue commits itself to accurate and timely management of the Chargeback process with its priorities including same day merchant notification, compiling and submitting the evidence to the acquiring bank, follow-up with the acquiring bank and final resolution of the dispute cases.
Preventing Chargebacks - A merchant's guide to reduce Chargeback rates
A combination of transparency, operational discipline and strong customer communication is highly recommended to reduce your chargeback rate and prevent dispute management. Given below are key practices every merchant can follow:
Transparency at Checkout
A prominent display of your Cancellation and Refund policy on the checkout page with a checkbox against "I accept the transaction policy" will make your customers aware of your terms and let them proceed with the payment after accepting them. VISA and Mastercard require this for 'card-not-present' transactions.
Maintain Documentation Standards
Preserve signed or digitally confirmed delivery proof of all orders for at least 1 year. For digital products, you can keep a record of delivery logs, timestamps, IP addresses, and download confirmations.
Act fast on Risky transactions
Cancel suspicious or fraudulent orders within 48 hours. Cancel confirmed non-delivered transactions within 5 days. Issue refunds within 90 days of the transaction date.
Verify High-Risk Orders
A merchant needs to be well prepared to face incidents of fraudulent activities. It is therefore required to verify overseas customers with the payment aggregator without fail, especially when you run a high-risk business.
Ensure Expedited and Trackable Shipment
Customers who have been waiting for longer periods and have still not received the ordered items can also dispute the transaction. A faster shipping option along with shipment-tracking information helps to show your customers where their package is, and to establish trust in your business. A confirmation email containing details of the purchase should be sent to
the customers once the payment is done from their side.
Provide accurate Product Information
The customers should be aware of what they are purchasing and have right to complete information. It is therefore imperative for the merchant to update detailed information of the product or service on the product page. In case the information given does not match with the product received, the customer may raise a chargeback.
Clearly Communicate Policies
A comprehensive explanation of all your terms and conditions including critical policies such as returns, exchanges, and authorization holds, needs to be made easily accessible to the customer. Let them be fully informed about automatic charges and variable subscription amounts.
Monitor Chargeback-to-Transaction (CTR) ratio
Keep the CTR ratio below 0.75% to stay clear of card network monitoring programs. CCAvenue payment gateway will send you an alert proactively if your ratio is approaching threshold levels.
Manage Subscription Payments
To eliminate most of the subscription related chargebacks, it is recommended to send a notification 7 days before each recurring debit. Also provide an easy cancellation mechanism.
Offer Excellent Customer Support
Extending the best type of customer support can save you a lot of hassle. The customers are most likely to raise the concern with the merchant and ask for a refund in case a transaction has gone wrong, before they will reach out to the issuing bank.
CCAvenue payment gateway's dedicated Chargeback Team handles approximately 100-150 chargeback cases on a daily basis across all card networks. Our team is trained on VISA, Mastercard, RuPay, and AmEx rules, and operates solely to help you maximise dispute wins and protect your business.
AvenuesAI
