In the payments industry, a disputed transaction refers to a situation where a cardholder or customer questions the validity, accuracy, or integrity of a specific transaction made with their payment card. Disputes can arise due to various reasons, such as unauthorized or fraudulent transactions, billing errors, defective goods or services, or dissatisfaction with the purchase.
When a customer disputes a transaction, the following general process typically occurs:
- Customer Notification: The customer notifies their card issuer or bank about the disputed transaction. This is often done by contacting customer support or initiating the dispute through online banking or mobile apps.
- Provisional Credit: In many cases, the card issuer provides the customer with a provisional credit while the dispute is being investigated. This credit allows the customer to be reimbursed temporarily for the disputed amount, providing relief during the investigation process.
- Investigation: The card issuer initiates an investigation into the disputed transaction. They may request additional information or documentation from the customer and may contact the merchant involved in the transaction to gather evidence and details.
- Merchant Response: Upon receiving a dispute notification, the merchant is typically notified and given an opportunity to respond to the dispute. Merchants are usually required to provide evidence to support the validity of the transaction, such as proof of delivery, transaction records, or any relevant communication with the customer.
- Resolution: After reviewing all the available information, the card issuer makes a decision regarding the dispute. If the issuer determines that the dispute is valid, they may reverse the transaction and debit the merchant’s account for the disputed amount. If the issuer finds in favor of the merchant, the provisional credit provided to the customer may be reversed.
Merchants play a crucial role in handling disputed transactions effectively. Here are some key steps for merchants to handle disputes:
- Monitor and Track Disputes: Merchants should regularly monitor their dispute notifications and maintain a system to track and manage them efficiently.
- Gather Evidence: Merchants should gather and maintain comprehensive transaction records, customer communications, and any other relevant documentation to support their case during the dispute resolution process.
- Respond Promptly: Merchants should respond to dispute notifications within the specified time frame. Failure to respond or delayed responses can negatively impact the merchant’s chances of a favorable resolution.
- Provide Clear and Convincing Evidence: Merchants should provide clear and convincing evidence to demonstrate the validity of the transaction and address the customer’s concerns. This may include proof of delivery, signed contracts, or any other evidence that supports the merchant’s position.
- Collaborate with Payment Service Providers: Merchants should work closely with their payment service providers or acquirers to understand the dispute resolution process, seek guidance, and provide necessary information for the investigation.
It’s important for merchants to familiarize themselves with the dispute resolution policies and procedures set by the card networks and payment processors they work with, as these may vary. By efficiently managing and responding to disputed transactions, merchants can minimize the impact on their business and maintain positive customer relationships.