How Do Banks Investigate Disputes?

Disputes against merchants don’t only involve the filing customer and merchant. The customer’s bank and associated credit card providers involve themselves to solve disputes.

Customers file disputes when they believe a business has wronged them or an unauthorized purchase has been made with their card. Instances such as fraudulent transactions or misrepresentation may warrant disputes.

Unresolved disputes will turn into chargebacks. A high chargeback rate causes businesses to become high risk and can lose access to payment processing.

Types of Disputes

Credit card companies categorize disputes by where the problem is rooted in. For example, Visa has four categories of dispute reasons: processing errors, customer disputes, fraud, and authorization problems.

Each dispute reason has a code. These codes show up on chargeback reports that merchants receive. Each credit card company will have different chargeback reason codes.

Processing Errors

Processing or point-of-interaction errors can result from technical issues.

Late Presentment
Duplicate Processing
ATM Disputes
Incorrect Currency
Incorrect Account Number

Customer Disputes

Customer or cardholder disputes are filed by clients who believe they’ve been wronged by merchants.

Merchandise not as Described
Merchandise not Received
Incomplete Transaction
Counterfeit Merchandise
Misrepresentation
Cancelled Recurring

Fraud

Fraud cases are neither the merchant’s or client’s fault. However, these types of disputes are common.

Card-not-Present Fraud
Card-Present Fraud
Chip Liability Shift
No Cardholder Authorization

Authorization Problems

More specific authorization issues that are not necessarily connected to fraud can be due to technical issues.

Multiple Authorization Requests
Card Recovery Bulletin
Decline Authorization
No Authorization

Each credit card company may separate these disputes into additional categories as well as describe codes in different ways. However, dispute reasons can boil down to these main issues.

Roles in Dispute Resolution

Developments in credit card processing and online banking has shifted dispute resolution processes. This includes the roles that merchants, customers, banks, and credit card companies have in resolving disputes. Additionally, each bank and credit card company may use different workflows to solve cases.

Banks

Banks are the point-of-contact between merchants, clients, and credit card companies. They are the ones that report disputes and facilitate communication.

Additionally, banks can monitor account activity to recognize fraud and errors. They’re able to then flag the transactions and pursue a dispute on behalf of customers.

Evidence is key in solving disputes. Banks will investigate evidence from their end and from offending merchants to find who is responsible for the dispute.

Credit Card Providers

Credit card providers such as Visa and Mastercard provide the processes necessary to solve disputes. They are also the final decision maker in dispute resolution.

Providers have guidelines for banks to follow in the case of a dispute. They may become involved at different parts of a process.

In the case of arbitration, where a final decision needs to be made, they will ultimately decide whether or not the merchant is at fault. Resolved disputes that point responsibility to merchants become chargebacks.

Chargeback Prevention

Luckily for businesses, there are additional tools that can prevent and delay chargebacks. A Revitpay favorite is a chargeback notification feature. This technology alerts businesses of incoming disputes with enough time to resolve them without involving banks or credit card providers.