Chargebacks and Disputes

This article is to brief you about the process of Chargebacks. This is a common term you come across if you are a merchant who collects payments online via Debit/Credit cards. In order to identify and avoid fraudulent online transactions, banks have a dispute process that the cardholder can make use of, which is termed chargebacks/disputes. 

What are Chargebacks and Retrievals?

Charge-backs are basically disputes reported by a buyer directly to his Bank (Card issuer) against a charge on their debit/credit card statements. The most common reason buyers file a chargeback is when they are unable to recognize the merchant's name on their statements and believe the transaction to be fraudulent or when they do not get the promised product or services for which they paid the merchant.

Based on the nature of the complaint, the buyer's banks informs the merchant's bank regarding the issue raised by the buyer in the form of a "Retrieval" or a "Chargeback". Merchant's bank then debits the merchant's account for the charged back amount and forwards the "Retrieval" or "Chargeback" to the Merchant asking for clarifications or proof of delivery of the products/services.

All sellers who accept credit card payments run the risk of being liable for chargebacks. Chargebacks are among the unfortunate costs of doing business. Many sellers factor this cost into their business risk model.

What happens when a chargeback is filed?

When a chargeback is filed and the amount is kept on hold from the merchant's bank account, an investigation is launched by the bank, on the transaction. The merchant has an option to either accept the chargeback or defend the chargeback case.

In order to defend the case, the merchant will have to share with Instamojo, appropriate proof of the payment fulfillment(invoices, buyer authorization mails, delivery receipts, etc.). Instamojo will then present the same to the bank for further verification. Please provide the required documents as instructed by our compliance team over the mail notification you receive from our end. The disputed transaction amount will be on hold and will be released upon successful representation of Chargeback.

When will we release the held amount?

Once a chargeback is filed Instamojo will be either accepting or defending the case on behalf of the merchant. The held amount will not be released until the bank closes its investigation and this can take up to 180 days. 

For more information on chargebacks and online frauds visit our blog.

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