1. CHARGEBACK

2. Table of contents 2
What is a chargeback? 3
Reasons for chargeback 4
Impact of chargeback 5
Chargeback process 5
What is necessary to reject chargeback? 7
Chargeback solution 9
Avoiding chargebacks 10
Conclusions 11

3. what is a
chargeback?
In electronic commerce, a chargeback is a reversal of a credit card transaction. The chargeback
procedure is launched by a bank or initiated by a bank-card issuer at the cardholder’s request.
It is a process in which the buyer questions debiting of his/her card in connection with a card trans-
action. It is available only to users who pay with their credit or debit cards. Cardholders have the
right to dispute any transaction processed on a Visa/MasterCard card.
In the chargeback process, the burden of proof is on the merchant. If the merchant provides docu-
mentation proving that a transaction was correct, the transaction amount is credited back to his
account. If the merchant fails to do so or does so after the deadline, the disputed amount will be
returned to the account of a consumer being a party to the dispute.

4. reasons for
chargeback
Chargebacks arise for a variety of reasons but generally they are the result of a cardholder not
receiving the product, being dissatisfied with their purchase or the result of fraud. To secure a
transaction made with a debit or credit card, the online-selling merchant may use the 3D-secure
service, as part of which the cardholder secures a transaction with a secret password defined in
bank e-services.
Chargeback reasons as shown on PayU.pl:
Product not received (cardholder states never receiving the product)
Product not matching description (it was damaged or did not match its description on the
website)
Duplicate transaction (cardholder placed two or more orders for the same product, thus being
charged for each transaction)
Fraud (transaction made by an unauthorised person)
Not recognized transaction (cardholder does not recognize the payment or forgot about making
it)
No refund (customer did not receive a transaction refund despite its cancellation or returning the
item)

5. impact of chargeback
Chargeback impacts all participants of the payment process; these are:
Provider of payment services - PayU S.A. or another payment institution taking part in a
transaction (Acquirer)
Card-issuing bank (Issuer)
Merchants
Customers (cardholders)
CHARGEBACK PROCESS
1 2 3
4
7 6 5
1. Visa or Mastercard cardholder -> 2. Card issuer -> 3. Provider of payment services (Acquirer
– PayU S.A. or another payment institution) -> 4. Merchant -> 5. Provider of payment services
(Acquirer – PayU S.A. or another payment institution) -> 6. Card issuer -> 7. Visa or Mastercard
cardholder.

6. 1. The cardholder contacts the bank which issued the card in order to dispute a transaction. The
card-issuing bank researches the dispute to determine whether there is sufficient evidence to
support the cardholder’s dispute.
2. The card issuer starts the chargeback procedure by giving it a code relevant for the chargeback
reason. In this way the issuer is credited the disputed amount.
3. The provider of payment services (Acquirer – PayU S.A. or another payment institution) receives
a chargeback with a chargeback code indicating the reason for complaint.
4. The provider of payment services informs the merchant that the chargeback has been recorded
and requests that the merchant analyses the complaint and provides documents proving that it
is irrelevant.
5. The merchant provides the provider of payment services with information on whether the
merchant accepts the complaint or not. In order to reject chargeback, it is necessary to provide
documents proving its irrelevance. If the merchant accepts the complaint or if the provided
documents do not sufficiently prove that the complaint is irrelevant (pursuant to Visa and
MasterCard regulations), the chargeback process ends and the acquirer charges the merchant’s
account with the disputed amount.
6. If the merchant rejects the complaint and provides documents proving that the complaint is
irrelevant, the provider of payment services rejects chargeback, charging the card issuer with
the amount of chargeback and presenting information and documents confirming the
relevance of rejecting the complaint.
7. In such case, the card issuer informs the cardholder about irrelevance of the complaint and
charges the card account with the disputed amount again.
In some cases, in responce to the cardholder’s complaint and before launching the chargeback
procedure, the card-issuing bank requests that the provider of payment services sends a copy of
transaction confirmation. In such case, the provider of payment services may request that the
merchant presents the transaction confirmation as well.

7. what is necessary
to reject chargeback?
Failure to deliver the item or provide the service
Customer’s confirmation of receiving the item (confirmation of sending an item is not sufficient
to reject the complaint) or service.
The copy of information containing a description of the item/service as well as the shipping date
and method presented to the customer during transaction.
Information on whether the cardholder contacted the merchant directly with the request to
consider the complaint and a description of the course of this complaint with a reason for
rejection (if applicable).
Item not matching description, damaged item or service provided otherwise than described
The copy of information containing a description of the item/service as well as the shipping date
and method presented to the customer during transaction, which proves that the item/service
does not match the description
Document confirming that the customer received the item and confirmed that it was not
damaged
Merchant’s written statements and documents (if available) if:
item was not returned by the customer
item/service was repaired or the missing elements were completed
Information on whether the cardholder contacted the merchant directly with the request to
consider the complaint and a description of the course of this complaint with a reason for
rejection (if applicable).

8. what is necessary
to reject chargeback?
Multiple payment for the same item/service (payment with the same card, different card, transfer
or otherwise)
Documents confirming that the payments concerned the purchase of various items/services
Merchant did not return the transaction amount
Confirmation that a relevant return was made
Merchant’s written statements and documents (if available) if:
item was not returned by the customer
the merchant did not accept the return or service cancellation
merchant presented the conditions of resignation and returns upon purchase
Fraud transaction = made without the cardholder’s knowledge and consent
Any documents containing more information about a transaction than data presented in the card
transaction settlement file: a detailed description of the ordered item/service, cardholder’s data,
addressee’s and shipping data

9. chargeback solution
Chargeback closing reasons on PayU.pl:
Refund was granted (the merchant accepts the chargeback and returns the disputed amount into
the cardholder’s account)
Refund was denied (the merchant proves that the chargeback is irrelevant and thus the payment
is valid)
Chargeback was lost (the merchant does not respond in due time or the cardholder’s bank has
evident proof that the chargeback is relevant)

10. avoiding chargebacks
Any time credit card payments are involved in a transaction, there is always the risk of a chargeback.
Sometimes buyers are not satisfied with their purchases, or their order never arrives, or their credit
card has been used fraudulently.
The best way to deal with chargebacks is to prevent them from happening in the first place.
However, there are several simple steps that can be taken to minimize chargebacks caused by
customer error or failure to recognize your charge on their account.
The order confirmation page must provide the customer with the name, phone number, e-mail
address of the company so that the client will recognize the charge when it appears on their
monthly credit card statement. Not recognizing a charge is the main reason a customer will issue
a chargeback.
Send your customers an e-mail confirmation that contains the same company information.
Have the return/refund policy clearly stated on the website. Make it a requirement that customers
read the policy before their order can be completed.

11. Have the return/refund policy clearly stated on the website. Make it a requirement that customers
read the policy before their order can be completed.
Have the merchant’s direct contact data for lodging complaints stated on the website. Many
reasons for chargebacks must be preceded with a complaint reported by the cardholder directly
to the merchant.
Provide accurate descriptions of your products on the website.
Respond to the chargeback as quickly as possible.
conclusions
Efficient chargeback processing reinforces credibility in card payment systems for a customer. In
fact, the chargeback rules protect customers when handling claims. This generates trust in the
systems and motivates the customer to prioritize the use of cards over other payment methods.