Chargeback Management 101

Welcome to our latest edition of "Connecting the Dots in Payments with Arthur Bedel," where we explore the dynamic world of financial transactions and innovations alongside this esteemed payments professional. Join us as we uncover insights and trends shaping the future of payments

Chargebacks Management 101 — what are they & what is their impact in payments? It's a little tricky to say the least👇

Cardholders file a dispute, also known as chargebacks, to their card-issuing bank to request a reversal of the transaction or charge. The fees associated are extremely expensive, can damage a merchants relationship with the card networks - Visa & Mastercard - and are very time consuming.

Fraud engines can pro-actively reduce chargebacks by setting various rules. It is important to work closely with your Payment Provider - Nuvei, Adyen & Worldpay - or Third-party companies - Signifyd, Forter, Riskified, Chargebacks911 to avoid them at all cost.

The Chargeback process in eCommerce 👇

🔸A customer is unhappy with the product, did not receive the item or a few other reasons files a dispute to either the Issuer - Wells Fargo, Chase, Bank of America - or Payment Service Provider (PSP). That entity sends a notification to the marketplace's inbound gateway.

🔸 The inbound gateway sends the dispute notification to the correlationservice, which reconciles internal orders and their payments with external bank information. The dispute notification then gets sent to a messaging component.

🔸 The chargeback claim now requires evidence and is sent to the Dispute Service before gathering additional information by the PSP on the payments lifecycle at which point the financial institution locks the refund and holds the payout.

🔸 The Dispute service now submits its decision (accept or defend) to the outbound gateway, then passed to the Issuer or PSP for arbitration and settlement decision.

🔸At this point, the Issuer or PSP sends the decision and settlement files back into the inbound gateway, correlation services and through the messaging component.

🔸 The Reconciliation Service reconciles all of the information - arbitration result and settlement files and send those to the Dispute Service one last time.

🔸 If the Dispute is won by the customer, the PSP recovers the funds from the merchant/seller and provides a refund / payout to the other parties.

This example, due to the payout piece of it, showcases a marketplace like Bonanza, Rebag, StockX, eBay, GOAT Group, Poshmark, REVOLVE and others.

👉 Chargebacks are a form of Fraud but Fraud providers help businesses ultimately protect themselves in many areas:

🔸Account Creation: Alloy, Trulioo

🔸Account Login: Castlelake, SecureAuth Corporation

🔸Fraud Prevention: Ravelin, Forter, Sift

🔸Transaction Monitoring: Radar, Alloy, Nuvei

🔸Etc. Choose a partner that really understands your business model - it can save you time and money... a lot 😉

Source: Hua Li, ByteByteGo & Medium

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✍️ Connecting the dots in payments... & Marcel van Oost by Arthur Bedel