Disputes

Disputes occur when a customer challenges a transaction on their credit card statement, initiating a chargeback.

Why disputes happen

Misunderstandings: Customers may not recognize a transaction due to unclear statement descriptors.
Unauthorized charges: Customers may claim the transaction wasn’t authorized.
Dissatisfaction: Customers are unhappy with the product or service received.

Dispute Lifecycle

Payment processed

A purchase or payment is processed on a cardholder's account.

Dispute initiation

If the cardholder does not recognize the transaction or is dissatisfied, they can initiate a dispute through their bank.

Investigation

The bank reviews the dispute and requests information from the merchant to verify the transaction's validity. The disputed amount is deducted from the merchant's account balance, along with any associated fees.

At this stage the dispute status will update to X days to respond in the Dashboard.

Evidence submission

Once the dispute has been posted to the merchant’s account, the merchant has 9 business days to respond with compelling evidence that supports their case.

To submit evidence through the Dashboard:

Navigate to Disputes and select the desired dispute
Click on Respond to Dispute in the alert banner
Upload compelling evidence
Click the Submit button

Alternatively, dispute evidence can be submitted using the Create Dispute EvidenceAPI endpoint. Once submitted, the dispute status will update to under_review.

If evidence is not provided by the evidence due date, the dispute will be automatically accepted and the dispute status will update to deadline missed in the dashboard.

Resolution

The bank evaluates the merchant's response and supporting evidence before making a final decision. If the dispute is ruled in favor of the merchant, the funds are reversed and the merchant's account balance is restored. However, if the dispute is upheld, the funds remain debited from the account balance.

Depending on the outcome, the dispute status will update to won or lost.

Compelling Evidence

“Compelling evidence" for disputes includes any documentation that proves a customer authorized the transaction and received the goods or services as agreed. This evidence varies by product and dispute reason but commonly includes:

Proof of delivery: This can include shipment tracking information, delivery confirmation, or signed receipts from the customer acknowledging receipt of the goods or services.
Customer communication: Any correspondence or communication with the customer that demonstrates their satisfaction with the transaction, such as emails, chat logs, or support tickets.
Transaction records: Detailed records of the transaction, including invoices, receipts, order forms, or any other relevant documentation that clearly shows the purchase was authorized and completed by the customer.
Product or service descriptions: Descriptions or specifications of the product or service offered, including pricing, features, terms, and conditions, to establish that the customer was aware of what they were purchasing.
Contracts or agreements: If applicable, contracts or agreements between the merchant and the customer that outline the terms of the transaction, refund policies, or any other relevant terms and conditions.
Proof of identity: In cases where identity verification is crucial, providing evidence that verifies the customer's identity, such as government-issued identification documents or authentication records.

If a single card has multiple disputed payments, the bank will require separate submission packets for each payment.

Dispute States

The dispute status is updated throughout the dispute lifecycle. You can actively monitor these updates by setting up webhooks or configuring your email preferences to receive real-time notifications about key status changes.

Email notifications are sent when action is required from the merchant and upon dispute resolution.

DASHBOARD STATUS	API STATUS	DESCRIPTION	MERCHANT ACTION
`X days to respond`	`warning_needs_response`	Customer is inquiring about the transaction. This is known as a retrieval or inquiry.	Evidence is submitted automatically on behalf of the merchant. Most disputes will skip this status.
`inquiry under review`	`warning_under_review`	Evidence has been submitted in response to the inquiry.	No action needed.
`inquiry closed`	`warning_closed`	If a chargeback was not opened within 120 days of the inquiry, the inquiry will be closed.	No action needed.
`deadline missed`	`warning_closed`	Merchant did not submit evidence in response to the inquiry prior to the evidence due date.	No action needed.
`X days to respond`	`needs_response`	Customer has officially disputed the transaction. This is known as a chargeback.	Merchant needs to submit evidence.
`under review`	`under_review`	Merchant has submitted evidence in response to the dispute.	No action needed.
`won`	`won`	The dispute has been won and a reversal was initiated.	No action needed.
`lost`	`lost`	The dispute was lost.	No action needed.
`deadline missed`	`closed`	Merchant did not submit evidence in response to the dispute prior to the evidence due date.	No action needed.

Prevent Disputes

Merchants can take various steps to protect themselves from disputes:

Utilize clear statement descriptors: Ensure statement descriptors are clear and concise to minimize customer confusion and prevent disputes from unrecognized charges.
Provide detailed descriptions: Offer comprehensive information on products and services to set accurate expectations and reduce misunderstandings.
Resolve customer issues promptly: Address and resolve customer concerns quickly to avoid escalations to dispute filings.
Verify AVS and CVV for online transactions: Confirm the cardholder's presence by verifying the address (AVS) and Card Verification Value (CVV), reducing the risk of fraud-related disputes. By default, AVS and CVV checks must pass to process a payment through .
Define refund policies and Terms of Service clearly: Effectively communicate your policies to help customers understand their options, preventing disputes related to policy misunderstandings.

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