• Ashwin Nazareth

A merchant's guide to compelling evidence in chargebacks

Updated: Nov 1, 2020


In this article, we take a look at one of the most challenging parts of the chargeback process – submitting compelling evidence. We'll go over how compelling evidence is reviewed, why it sometimes works, and why it sometimes doesn’t.


Why is it so hard to get a definite answer?

This topic can be confusing because it's not as black-and-white as the rest of the card scheme rules. This isn't caused by the lack of clear rules - on the contrary, there are hundreds of pages on the subject available within the rules themselves.

  • The first cause is that the rules are interpreted by hundreds of people working in payment processors and banks involved in your payment dispute - in short, everyone's interpretation of the scheme rules often varies, and they are incentivised to look at it through a lens of reducing their own risk exposure to your transaction.

  • The second is that each merchant tends to perform record-keeping in their own unique way - there is no single standard of proving that a transaction has been fulfilled successfully because everyone's business model is different. To add to the complication, some merchants do not store records consistently for each of their sales transactions. Delivery dockets go missing, tracking numbers get wrongly assigned, and product descriptions change on their websites. This often results in varying outcomes for the cases, even sometimes with multiple purchases from the exact same customer.


What are the types of chargebacks, and what do I need to know about them?

Fraud chargebacks are unique in the sense they are more binary than the other cases – either the transaction is genuine fraud, or it isn’t. All attempts to defend against these should be based on proving the transaction was not fraudulent and the cardholder has simply forgotten about or failed to recognize the transaction. In cases where there are no authentication steps taken to result in a liability shift, a merchant should strive to always collect back-up evidence which proves that the cardholder was a party to the transaction, and not focus on proving the merchant has provided the goods or services.


While the scheme rules often prohibit requiring identification documentation during a casual retail transaction, it is often permitted in many industries to conduct due diligence on customers upfront (i.e. hotels, banking, first-time account registration on a website, etc.) which provides a legitimate opportunity to ensure the cardholder's name matches their government-issued identification – records of these validations should be used during a chargeback case.


Written communication is also a powerful tool in defending against chargebacks – email threads, account registration or self-collection documentation – however, it is again important to ensure that the cardholder is connected to the transaction by virtue of their card, identity, or user account details and not solely by them signing their name on a slip of paper.

Cardholder complaint chargebacks are some of the most difficult to defend against as a merchant has to disprove a cardholder’s claim that there was an issue with the product/service and this was not addressed during a direct complaint to the merchant.


Based on the above condition, it is imperative not only to have good customer support but also to have effective documentation of this support through customer service call logs and case notes - recording the nature of the complaints and the outcome of the resolutions provided. For digital goods or online purchases, it is also important to keep records of user’s preferences or profile settings which show the purchase controls offered (e.g. "save my card for future purchases" or "do not authenticate for purchases below $20 USD") to defend against chargebacks claiming inadequate purchase controls were in place.


Here's the chargeback process in a nutshell

“Good” compelling evidence is consistent, well documented, and definitive (i.e. not open to multiple interpretations). It is important to note that compelling evidence does not need to be a single document but often is a combination of several sources of information used to form a strong submission.


So, who are these people reviewing my chargeback?

During a chargeback, the compelling evidence changes hands several times. As a general rule, almost all parties need to voluntarily agree to a common interpretation of the evidence for a chargeback to be successfully defended. These parties include:

  • The Merchant (who submits the evidence)

  • The Acquirer (who reviews the evidence)

  • The Issuer (who reviews and/or agrees with the evidence)

  • The Cardholder (who may be required to review, and often agree with the evidence)

What makes "good" compelling evidence then?

  • Evidence of a refund – i.e. the merchant refunded the transaction either back to the original card or by cheque or bank transfer.

  • Evidence that a cardholder provided authentication - i.e. entering a card PIN or one-time passcode (OTP), linking the transaction to the user's account login within the merchant's app or website.

  • Positive identification of the cardholder alongside a copy of their ID (in some cases this isn't the person making the purchase, but the person who owns the credit card).

  • Linking the cardholder to a specific user account on your app or website, showing that they logged in to purchase the product or service.

  • Written communication and evidence that the product or service was received by the end-user.

What if it goes wrong, can I get a do-over?

Broadly speaking, chargeback rules state that there are two instances where compelling evidence can be submitted by a merchant – once during the "second presentment" or "representment" (where you as a merchant first challenges the chargeback), and another during the pre-arbitration response stage.


In practice, however, a merchant’s first submission is the most important – for a few reasons:

  • In cases of Visa Claims Resolution Disputes, there is no second presentment stage and the case moves directly to pre-arbitration. Thus there is only one opportunity for submission.

  • In an attempt to side with their customer (the cardholder), issuers are incentivised to decline any evidence deemed "too circumstantial" in both submission stages, without even discussing it with the cardholder. While not entirely by-the-book, this is done as they know that receiving an arbitration case in response would be highly unlikely due to the potential costs involved for the merchant fighting the case.

  • If an issuer lodges an arbitration case directly to the card scheme (e.g. Visa or Mastercard) at any time during the process, there often isn’t a chance for a second submission of evidence without risk of having to bear the expensive case fees for accepting the arbitration.


Still not sure how to proceed?

Dicorm can help you set up an effective chargeback defence framework that's both efficient and easy to follow, increasing your chances of holding on to those hard-earned dollars you spent so much time and effort getting in the first place. Contact us today for a no-obligation chat about setting up your chargeback process.

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