In the next in our chargebacks series, we examine the six most common reasons for chargebacks. We explain how to defend them and, most importantly, prevent recurrence.

If a card issuer returns a previously-processed card sale to your acquirer, they must do so using card scheme-specific reason codes. As you would expect, these define the reason the transaction is being disputed.

There are more than 20 such reason codes, which are organised into six main groups for ease of use.

Cardholder does not recognise

As it says on the tin, the customer may not recognise the transaction or amount on their statement.

To defend this chargeback, provide your acquirer with all the details you have on file, including a full description of the merchandise or services provided/purchased.

If you often receive this type of chargeback, check that you have supplied your acquirer with an easily recognisable business name to flow through to the customer’s statement.

Non-receipt of goods/services

This type of chargeback may occur if you have not supplied the service or merchandise as the customer was expecting. Equally, the customer may have misunderstood their purchase. For example, thinking they had signed up for a six-month service when it was only for three.

To defend this chargeback, provide your acquirer with compelling evidence that the cardholder participated in the transaction and/or received the goods.

This could be in the form of a signed delivery receipt by the cardholder or courier tracking documentation. It could be details of the customer’s IP address, e-mail address, description of the goods downloaded, date and time of download, if you deliver digital goods or services. Similarly, signed check-in or pick-up documentation in the case of hotel or car rental.

If you often receive this type of chargeback, tighten up your proper disclosure policies and consider revising the frequently asked questions section on your website. Also, shipping goods before charging the customer’s cards prevents misunderstandings around non-receipt.

Cancelled/returned

Either the customer has cancelled their booking or returned goods and has not received a refund. Or the goods/service were defective or not as described. Or the customer cancelled a recurring transaction, yet has still be charged.

To defend these chargebacks, provide your acquirer with evidence that the customer is not entitled to a refund under your terms and conditions.

If you often receive this type of chargeback, it’s again an opportunity to tighten up your proper disclosure and cancellation policies.

Fraud

These types of chargeback may occur if the customer claims not to have participated in the transaction or allowed their card to be used for the charge processed to their account.

To defend this, you need to evidence to your acquirer that the genuine cardholder did participate in or authorise the transaction. For example with a fully signed and completed sales voucher, a signed delivery receipt by the cardholder, or with any other documentation or compelling evidence.

If you often receive these chargebacks, it may be worth beefing up your fraud-screening arrangements.

Authorisation

Either you did not obtain authorisation, or the card account or expiration date was not valid.

Your acquirer should be able to defend this type of chargeback with information they have on their systems. However, if you process through a third party, you may have to liaise with them to provide the information required.

If you often receive these chargebacks, reiterate correct card handling procedures to your staff. This will help prevent avoidable errors, such as failing to authorise payments, ask for a signature, or processing transactions more than once.

Processing error

This is quite a broad chargeback reason group. Generally, your acquirer should be able to defend chargebacks with data from their systems. If they need further information from you, they will specify this when they contact you.

Repeated chargebacks from a particular chargeback group may indicate that something is not quite right with your business or business practices. Monitor and analyse the types of chargebacks you receive to act and prevent recurrence.

PXP Financial

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