CHARGEBACK
MANAGEMENT
June 2020
What are chargebacks?
The process
Best practices
COVID-19
FAQ
The Worldpay
solution
What are chargebacks exactly?
Disputes, also known as chargebacks,
occur typically when a consumer contacts
their card issuer to request their money back
for goods or services purchased, rather than
you, who they bought them from.
The majority of consumers have admitted to have
raised a dispute out of convenience, what is
known as ‘friendly fraud’.
There is also the matter of criminal fraud:
customers who simply want something
for nothing.
What are chargebacks exactly?
Disputes, also known as chargebacks,
occur typically when a consumer contacts
their card issuer to request their money back
for goods or services purchased, rather than
you, who they bought them from.
‘Friendly fraud’ makes
The majority of consumers have admitted to have
raised a dispute out of convenience, what is
known as ‘friendly fraud’.
There is also the matter of criminal fraud:
customers who simply want something
67% of all disputes
for nothing.
3
What are chargebacks exactly?
Disputes, also known as chargebacks,
occur typically when a consumer contacts
Fraud-related
their card issuer to request their money back chargebacks are
for goods or services purchased, rather than infuriating and expensive.
you, who they bought them from. There’s also the risk of
being placed on a card
scheme chargeback
compliance program if
your chargeback levels
are excessive
The majority of consumers have admitted to have
raised a dispute out of convenience, what is
known as ‘friendly fraud’.
Card schemes and banks
are often reluctant to
There is also the matter of criminal fraud: refuse chargeback claims,
customers who simply want something and managing those
for nothing. chargebacks can prove
costly and labor intensive.
Taking preemptive
measures can often have
a negative impact on
acceptance levels
4
The process
The chargeback Visa and Mastercard Timeframes Reconciliations
lifecycle specific cycle
The chargeback lifecycle
1 2
1
The Cardholder
initiates a dispute via their bank
2
or credit card company
The Issuer reviews
the chargeback and submits it
3 to the card network either as a
Chargeback or a Request For
Information (RFI)
The Scheme screens
the chargeback, rejects it if
issuer hasn’t met technical
requirements for the reason
code used, otherwise it is
passed on to Worldpay
(RFIs are usually passed on) 3
4
5 5
Worldpay receives
Chargeback or Retrieval You accept the debit/
request or an RFI and do nothing or provide defence
4
notifies you via EMIS, WPG, material to the Issuer via
or an alert from Worldpay’s portal or API
the Worldpay Disputes Portal to defend the chargeback
The chargeback lifecycle
6
You provide defence material
to Worldpay within
6
the required timeframe
8
Scheme transmits the dispute
from the Acquirer to the Issuer
along with documentation 8 7 7
provided by you
Worldpay sends relevant
documents to the Scheme,
if they’re deemed
9 a sufficient defense
10
The Issuer reviews evidence
10
and charges back payment
from you1 to the Cardholder or 9
drops the dispute. If the
payment is charged back, The Cardholder receives the
a handling fee is charged to dispute resolution information
you, debited in the invoicing and may be rebilled or credited
currency of the MID used
for processing
1 In the originally used settlement currency
Visa and Mastercard specific cycle
Each card scheme has their own unique
chargeback cycle.
Mastercard currently uses a ‘Second chargeback’
process, however this stage will be removed for all Click to zoom in
1st chargebacks raised on/after 17 July 2020
Visa goes from ‘Re-presentment’ directly to
‘Pre-arbitration’ stage. With chargebacks for
fraud a ‘Pre-arbitration’ is raised instead of
a ‘Re-presentment’. Click to zoom in
Mastercard cycle
2nd chargeback
1st chargeback Re-present Pre-arbitration File case
To be removed in July 2020
MCI rule
120 days 45 days 45 days 45 days
Second chargeback
Mastercard cycle
2nd chargeback
1st chargeback Re-present Pre-arbitration File case
To be removed in July 2020
MCI rule
120 days 45 days 45 days 45 days
Our ability to defend you relies on the documentation you submit. It should address the Reason
Code and allow us a ‘Re-presentment’ right. However, please note that a ‘Re-presentment’
Second chargeback isn’t a guarantee of successful defence. It’s essential to include all relevant information within
the initial stage. If the issuing bank changes Reason Codes or continues the chargeback based
on information missing from our ‘Re-presentment’, then we can’t rely upon it at a filing stage.
Visa cycle
Allocation Collaboration
Valid
Issuer Acquirer Issuer Acquirer
Dispute Dispute
Pre-arbitration 20 days* Dispute response 20 days
Pre-arbitration 20 days*
Pre-arbitration response 20 days*
Pre-arbitration response 20 days*
Arbitration 10 days*
Arbitration 10 days*
Final ruling Final ruling
* Hard timeframes
Timeframes
Raising For most Reason Codes, the Cardholder has
chargebacks
120 days
from the processing date of the transaction to raise a chargeback (or from the expected
delivery date of the services, such as a flight date, for ‘Services not received’ type
chargebacks).
Cardholder The timeframe depends solely on the issuing bank and their internal policy. It may also
be affected by the Cardholder’s bank account. Some banks issue a temporary credit
receiving funds
upon raising the chargeback.
from chargebacks
We’ll receive a debit when the chargeback is raised. While we can confirm when/if this
debit will be passed to you, we’re unable to influence when the funds are passed to
the Cardholder, if resolved in their favour.
Reconciliations
When a chargeback is received, we receive a debit from the issuing bank. We hold it while we verify
if it’s a valid dispute and that the issuing bank hasn’t made any technical errors. If valid, we’ll seek
defence material from you. For CNP (Card Not Present) fraud disputes, a debit will be automatically
applied to your account on the
14th day
and the chargeback will complete, if documentation is not submitted in time to prevent the debit (taking
into account our administrative processes). If the documents provide a ‘Re-presentment’ right and are
received in time, we’ll send this debit back to the issuing bank, without having debited you 1.
NOC
2
AOS
3
Note: The process above doesn’t apply to NAP Please note that there are multiple factors which may
1 Domestic CNP fraud excluded, which issues an unavoidable debit within 14 days of the AOS. This debit is reversed if we are affect the debit date of a chargeback to you and that
able to ‘Re-present’
2 Notification of Chargeback these timeframes are based on circumstances where
3 Adjustment of Status you do not respond to a dispute.
Reconciliations
When a chargeback is received, we receive a debit from the issuing bank. We hold it while we verify
if it’s a valid dispute and that the issuing bank hasn’t made any technical errors. If valid, we’ll seek NOC will show as
defence material from you. For CNP (Card Not Present) fraud disputes, a debit will be automatically ‘Charged back – Action required’
applied to your account on the within WDRC, in
14th day
and the chargeback will complete, if documentation is not submitted in time to prevent the debit (taking
into account our administrative processes). If the documents provide a ‘Re-presentment’ right and are
received in time, we’ll send this debit back to the issuing bank, without having debited you 1.
15 days
from the issuance of the NOC,
an ‘Advice of Net Settlement
NOC
2
will be issued
AOS
3
Note: The process above doesn’t apply to NAP Please note that there are multiple factors which may
1 Domestic CNP fraud excluded, which issues an unavoidable debit within 14 days of the AOS. This debit is reversed if we are affect the debit date of a chargeback to you and that
able to ‘Re-present’
2 Notification of Chargeback these timeframes are based on circumstances where
3 Adjustment of Status you do not respond to a dispute.
Reconciliations
When a chargeback is received, we receive a debit from the issuing bank. We hold it while we verify
if it’s a valid dispute and that the issuing bank hasn’t made any technical errors. If valid, we’ll seek
AOS will show in
14 days
defence material from you. For CNP (Card Not Present) fraud disputes, a debit will be automatically
applied to your account on the
14th day
and the chargeback will complete, if documentation is not submitted in time to prevent the debit (taking
into account our administrative processes). If the documents provide a ‘Re-presentment’ right and are from the issuance of an Advice
received in time, we’ll send this debit back to the issuing bank, without having debited you 1. of Net Settlement. The
chargeback will complete on
our system and a debit should
NOC be reflected on your account
2
AOS
3
Note: The process above doesn’t apply to NAP Please note that there are multiple factors which may
1 Domestic CNP fraud excluded, which issues an unavoidable debit within 14 days of the AOS. This debit is reversed if we are affect the debit date of a chargeback to you and that
able to ‘Re-present’
2 Notification of Chargeback these timeframes are based on circumstances where
3 Adjustment of Status you do not respond to a dispute.
Best practices
Prepare a summary page of the Break down the order/booking Provide any documentation
key points of the case, to prove details and the individual cost of from any third parties,
why the chargeback is invalid the separate segments relevant to the case
Attach your Terms and Send over the confirmation Provide information that will
Conditions, with e-signature/ email detailing order/booking/ help the Cardholder to
signed by the Cardholder price (including the currency) recognise the transaction
Please be aware that including this information with
your documentation may give us the strongest chance
of winning the dispute, however it in no way guarantees Forward any communication Add social media/photographic Make copies of all related
this. The card schemes are the ones to make the final with the Cardholder to support evidence linking the Cardholder services and a breakdown
decision regarding the outcome of a chargeback. your case to the transaction/services of any exchanges
COVID-19
Expected impact Rules & policy updates Chargeback liability Business survival
across industries from card schemes factors strategies
Expected impact across industries
Low exposure Construction/materials Pharmaceuticals
Defense Real estate, REITS
Equipment & transportation Food/food retail
Rental Telecoms
Packaging Waste management
Moderate exposure Beverages Property developers (China)
Chemicals Protein and agriculture
Manufacturing Services companies
Media Steel producers
Metals and mining Technology hardware
Oil and gas/oilfield services
High exposure Apparel Lodging/leisure and tourism
Automotive manufacturers Passenger airlines
Potential positive impact Automotive suppliers Retail (non food)
Consumer durables Global shipping
Source: [Link]/coronavirus Gaming
Expected impact across industries
Low exposure Construction/materials Pharmaceuticals
Defense Real estate, REITS
Equipment & transportation Food/food retail
Rental Telecoms
Gold Internet Packaging Waste management
mining service
companies Moderate exposure Beverages Property developers (China)
Chemicals Protein and agriculture
Manufacturing Services companies
Retail online Media Steel producers
Metals and mining Technology hardware
Oil and gas/oilfield services
High exposure Apparel Lodging/leisure and tourism
Automotive manufacturers Passenger airlines
Potential positive impact Automotive suppliers Retail (non food)
Consumer durables Global shipping
Source: [Link]/coronavirus Gaming
Rules & policy updates from card schemes
Rules COVID-19 Law & Vouchers and credits
Require issuers to withdraw invalid monitoring regulation Use to prevent and defend
chargebacks, if instructed by the scheme chargebacks
Monitor Legal override
Issuers are submitting quality disputes You may have protection if Government
and not abusing the system Legislation prevents you from providing
the service
Be proactive Best Compliance Fraud & chargebacks
Reach out to customers early and practices Payment schemes programs Relaxation of monitoring and penalties
prevent a chargeback Respond to events for some categories
as they unfold
Refund timely Other rules
Honor your promises and obligations Continue as normal – required
standards are maintained
Be ready to defend
Always represent where you can
Chargeback liability factors
Supply-line Increased Overwhelmed Fulfillment and Financial Businesses across
all sectors should
interruption consumer fear customer support service delays volatility
expect increased
levels of disputes
Increased Current policies Changing plans No payments Plus many
fraud activity inadequate and needs on contracts hidden factors
Business survival strategies
Under normal
business conditions Maintain fraud controls Protect cash reserves
Define core
priorities
Leverage outside assistance Refine Customer
and expertise Service policies
Shift to digital
communication
Confront worst
case scenario
Utilize alternative
refund options
Business survival strategies
Under normal
business conditions Use multilayer fraud detection Share your contact info
Optimize
your response
Make cancelling Deploy smarter
easier chatbots
Notify
customers
of delays
Adhere to
best practices
Deploy Alerts
and AMPI
FAQ
Please describe your chargeback fee structure from chargebacks to ‘Arbitration’. Do you charge a chargeback fee when your system auto-presents on
the chargeback? What are ‘Re-presentment’ policies that have fees associated with them (i.e. technical fines)?
This is part of our commercial discussion and the details can be discussed with you individually.
Please describe differences in the chargeback management process by card schemes, by region or by country.
This is part of our current process to support Apple in Japan, specifically today, and managed as such.
If providing access to new card associations (i.e. not VI/MC/AMEX), what are the timelines for the Cardholders, Issuers and us in the chargeback
process? (i.e. how long do customers have to dispute transactions? What is process with their issuing banks? How do Issuers confirm validity of
chargebacks? Are there regulations to be aware of for issues – like Reg E/Reg Z? What are our response timelines? etc.)
We don’t tend to manage the dispute process for card schemes that we don’t acquire. However, we could discuss it on a market specific basis.
FAQ
Please explain, in detail, the ‘Pre-arbitration’ and ‘Arbitration’ process by card scheme. What additional information we need to provide in these
situations? What new information is shared with us in ‘Pre-arbitration’ and ‘Arbitration’ cases? What is likelihood of us winning these cases?
Visa splits their disputes under two main groups: ‘Allocation’ and ‘Collaboration’. ‘Allocation’ contains dispute Reason Code categories: 10 (Fraud) and 11 (Authorization), while
‘Collaboration’ categories: 12 (Processing Errors), and 13 (Consumer Disputes). The ‘Pre-Arbitration’ process differs depending on which group the dispute falls under.
Allocation
When defending a chargeback under the allocation group, we (Acquirer) submit a ‘Pre-Arbitration’ to the Issuer. The Issuers upon receipt of the ‘Pre-Arbitration’ can either accept,
decline or ignore it. If accepted or ignored, the case is closed and we (and you) win. If the Issuer declines, we can submit the case for ‘Arbitration’1, in which case the Issuer will either
accept, or Visa will rule and make a decision as to which party is liable. If the Issuer has made an invalid first chargeback, we can miss out the ‘Pre-Arbitration’ stage and go straight to
‘Arbitration’1.
Collaboration
When defending a chargeback under the collaboration group, we (Acquirer) submit a ‘Re-presentment’ to the Issuer. The Issuer upon receipt of the representment can either accept/
do nothing (we win), or raise a ‘Pre-Arbitration’/go straight to ‘Arbitration’2 , if we have undertaken an invalid defense. If the Issuer raises a ‘Pre-Arbitration’, we review the evidence and
make a decision whether to accept it as a valid chargeback, or decline. If declining upon receipt of this, the Issuer has the option to file for ‘Arbitration’2. If they do, we can either accept
the ‘Arbitration’ or allow Visa to rule and make a decision as to which party is liable.
1 Additional fines/fees apply to the losing party
2 Per allocation additional fines/fee apply in Arbitration
FAQ
For the ‘Pre-Arbitration’ process under allocation you are required to provide evidence that refutes the chargeback. For example, for a fraud case we’d expect to see compelling
evidence. If a case does progress further to ‘Arbitration’ you will rarely, if ever, be contacted for further information, as Scheme rules don’t allow new evidence to be presented.
The same applies to ‘Collaboration’ (i.e. the evidence to defend will have been provided at the ‘Represent stage’).
Likelihood of winning ‘Pre-Arbitration’ varies depending on the Reason Code and strength of evidence provided. For ‘Arbitration’, our win rates tend to be high but you need to consider
that very few cases get to ‘Arbitration’ stage, and we only ever pursue then when we are confident of winning. With many years of experience working chargebacks we are able to
estimate which cases have a potential to be a win.
In case of Mastercard the Issuer raises 1st chargeback, then we can represent with defense. When the Issuer raises a 2 nd chargeback, we can send a ‘Pre-Arbitration’ or ‘Arbitration’.
‘Pre-Arbitration’/’Arbitration’ following receipt of 2nd chargeback follows the same route as Visa ‘Allocation’.
Effective for 1st chargebacks raised on/after 17 July 2020 Mastercard is going to introduce a new chargeback process and will remove the 2 nd chargeback stage. As such, for new
chargebacks the process to dispute following our represent will be the same as Visa ‘Allocation’.
Answers to new information shared and likelihood of winning are the same as per Visa.
FAQ
Please explain how case updates for chargebacks are provided to us. How do you differentiate those updates from the initial chargeback record?
The standard process doesn’t provide you with many updates. Simply, if you receive a notification of chargeback and provide evidence to refute and don’t receive a debit, you can
assume the evidence has been used to defend. Likewise, if you receive a debit, provide evidence to defend, then receive a re-credit you can assume the evidence has been accepted
and used to defend the case. Unfortunately, this is not ideal, as the Issuers have quite a long window to continue their case following an initial defense (30 days for Visa, 45 days for
Mastercard) – you have to take these into consideration to know if it’s a definite win.
What is technical and financial process of crediting us after we have a successful ‘Re-presentation’?
This can be discussed with you individually.
What is technical and financial process of crediting us after a chargeback reversal?
A chargeback reversal (as received from the Issuer) is processed in the same way as a ‘normal’ chargeback. The only difference would be if we hadn’t charged you for the 1st
chargeback, then we would net the reversal off this.
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Our Protect your Revenue solutions include
ResolveIt: Worldpay Disputes, a true end-to-end
global chargeback management suite, from prevention
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decreasing costs. through API calls,
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