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How merchants win chargeback disputes

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Last editedMar 20222 min read

Most non-cash payment channels have a chargeback process. This will include a chargeback dispute process. It’s important that merchants understand how these work.

How often merchants win chargeback disputes generally depends on how well they manage their business overall. Ideally, merchants should work to avoid chargebacks being raised in the first place. If they are raised, merchants should either accept them or raise an effective chargeback dispute.

What is a chargeback?

A chargeback is a process by which a payer reclaims the money they paid to a merchant. Sometimes chargebacks go by different names such as indemnity claims. The basic concept is, however, still the same as is the process for raising a claim.

In general, the customer is expected to try to contact the merchant and give them a chance to rectify the issue. If the customer cannot reach the merchant and/or the merchant cannot (or will not) rectify the issue to the customer’s satisfaction, the customer can raise a chargeback claim with the payment channel.

The payment channel should conduct an initial investigation of the customer’s complaint. If they are satisfied that it meets the necessary criteria, they will enter it as a chargeback for their customer.

Can a merchant dispute a chargeback?

Yes. You may be wondering what is a chargeback dispute – it comes about when a merchant disputes a payer’s right to chargeback a transaction. Typically, this involves the merchant demonstrating that the payer’s version of events was incorrect in some way.

With most schemes, the initial chargeback dispute process goes through the payment channel. If both parties end up satisfied with the outcome then it ends there. If, however, one or both parties are dissatisfied by the outcome, then they may choose to take the issue to a court of law.

Although winning a chargeback dispute is preferable to losing it, it’s even better to avoid having to deal with chargebacks in the first place. With that in mind, here are some tips on how to avoid chargebacks. Implementing these tips can also improve your chances of winning a chargeback dispute if you do receive a chargeback.

Always document everything accurately

This is the golden rule of running a business in the modern world. It has particular relevance when it comes to managing customers, including dealing with complaints and chargebacks.

Every aspect of your interaction with the customer should be fully, accurately and promptly documented. Where appropriate, your customer should be provided with a copy of these documents. If significant sums of money are involved, you may wish to ask them to sign the documents physically and provide you with a signed copy.

In this context, it’s worth noting that regular, small payments can become significant over time. It’s therefore usually advisable to have a signed contract in place if you work with a customer on a recurring basis.

Communicate with your customer

It’s better to over-communicate than to under-communicate. This is especially true if there is a gap between the customer ordering your goods/services and you delivering/providing them. Customers are busy people, too. They can forget that they ordered something and then charge it back incorrectly.

Make sure your contact details are easy to find

At a minimum, put your contact details on every communication with your customers. Don’t rely on customers looking you up on the internet. Firstly, they may not do so. Secondly, even if they do, they may end up being directed to the wrong website and hence the wrong contact details.

With that said, it’s still very much advisable to have some kind of online presence. If you don’t have your own website, then at least register your business on a social media platform. Make sure your contact details are there. Also, be sure to claim your place in business directories such as Google My Business.

We can help

If you’re interested in finding out more about how often merchants win chargeback disputes, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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