Chargebacks Representment Process Overview

Description: Learn all the essential information about chargebacks and the representment process.

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Chargebacks

Chargebacks can be costly and damaging for online merchants, but the good news is they can be managed. A chargeback is a form of protection banks provide for customers to file complaints against transactions made on their statements. Common reasons for chargebacks include:

• the credit is not being processed
• items not received
• technical problems
• faulty cards, and more!

It's important to note that chargebacks also come with a cost to you, not to mention the time and the energy you spend to dispute them. Large numbers of chargebacks can result in a higher chargeback ratio, resulting in more financial penalties. Unfortunately, sometimes, chargebacks are fraudulent. Fraudulent chargebacks are extremely difficult to win, even if you provide all the relevant documentation and evidence. It's essential to do everything possible to prevent chargebacks. However, in some cases, they are unavoidable. That's where the chargeback and representment process comes into play.

Chargebacks and Representment Process

It begins once the product and/or service is paid for and the customer decides to go to the issuing bank and file a chargeback. That chargeback is sent to the card organization as well as the acquirer. At this point in the process, you must pay a chargeback fee. The fee level depends on the contract. Once the chargeback is sent, the merchant, with the help of the payment gateway, Shift4, sends the acquirer all relevant documents, receipts, shipping proofs, logs, signatures, etc. All documents are gathered in the chargeback representment form. Once the form is submitted to the acquirer, it is sent to the issuer for final judgment.

What if you win and the customer is unsatisfied, though? If you provide sufficient documentation and win the final judgment about the chargeback, the customer can still decide to file for pre-arbitration. Unfortunately, this results in an additional cost to you, and again, its value depends on the contract details and the card network conditions. Nevertheless, pre-arbitration is not the last resort.
If the decision is still unsatisfactory for any parties involved, including yourself, you can file for final arbitration. As with pre-arbitration, this stage results in an even higher penalty for the loser, so you must be willing to take this risk. 

Retrieval Requests/Soft Chargebacks

These occur when the customer doesn't remember the transaction or if the transaction was completed by a family member who used the card data without informing the cardholder. In either of these scenarios, the customer might have spotted an unknown charge on their account, and instead of disputing a charge at once, they request information about the transaction. Responding to a retrieval request quickly is an excellent way to prevent chargebacks, and with Shift4, responding to these requests is simple because we provide all the relevant forms needed.

Double Refunds

These are bad for merchants because they require them to pay twice. Here's an example. A customer makes a purchase on a merchant's website. Then, a few moments later, you received a high fraud score, so you decide to refund the transaction. When you do this, the money is sent back to the customer, but the customer still moves forward with filing a chargeback. At that point, the chargeback and the representment process begins, and you are responsible for the fees associated with the process. Since these transactions are typically fraudulent, you win in most cases. But it’s important to note that chargeback still counts towards the chargeback ratio, and the time and the money associated with the chargeback and the representment process still apply. Although eliminating chargebacks entirely is impossible, there are effective strategies to minimize them beyond just offering clear product descriptions, shipping information, and refund policies. Ensuring website security is essential. Shift4, authorization and capture is a great first step.

Additionally, 3D Secure is a great way to shift the liability from the acquirer to the issuing bank. The issuer then needs to cover costs and take the risk and the responsibility.