What is a Chargeback?

In simple words, chargeback is a dispute against a particular transaction raised by the cardholder (end-user), and reported to their card issuing bank.
A chargeback is a provision by banks and card networks such as Visa & MasterCard to protect buyers from unauthorized or fraudulent payments.
Once the cardholder files a complaint, the bank reports the same to Razorpay and initiates an investigative procedure.

Why Chargeback?

There could be several reasons for chargeback against a particular transaction. A list of the most common reasons for chargeback is listed here.

Generally, chargebacks can be associated with unsatisfactory customer service/product or poor service delivery experience. Chargebacks can also be filed if the customer suspects fraudulent activity on their card.

Why avoid Chargebacks?

It is best to avoid any kind of chargeback, as banks and card networks can label your business as a fraudulent/high risk business, hampering your image. A customer has a timeframe of 120 days to file a chargeback, which means your sales are reversible for that time period.

A high number of chargebacks can lead to the banks holding remittances for the business as well. The worst case scenario could be a ban of online payment services imposed upon the business.

What’s the process to resolve a chargeback?

Chargebacks should be considered high priority issues due to the involvement of risk teams of both the customer’s bank as well as our partner banks. At Razorpay we have a process to resolve disputes/chargebacks.

Notification about the dispute

We will notify you by email/dashboard about the dispute, mentioning the payment ID and the reason for chargeback, if provided by the bank.

Review the chargeback

  • In order to represent the chargeback, review the chargeback and explain to us the chain of events that took place.
  • In case the goods/services have not been provided, review the issue and let us know if the customer is willing to accept the goods/services.
  • In case the goods/services have been provided, share the proof of deliveries, invoices, any other authorized proof of product/service delivery.
  • In case of a duplicate payment made, let us know so we can ask the bank to refund the amount back to the cardholder.

Chargeback phases and TurnAround Time (TAT)

Phase Timeframe
Chargeback T+3 Business days
Pre-Arbitration T+2 Business days
Arbitration T+1 Business day

Chargeback documents

For the chargeback you have received, share all documents as per the requirement of the bank with us. We will represent the dispute on your behalf. 

Banks generally provide a window of 3 Business days to represent the chargebacks. Failure to do so within the specified window will increase the number of chargebacks lost by you.

Click here to view the list of documents

How to respond disputes/chargebacks via Razorpay Dispute Dashboard?

To provide you a seamless experience, we have moved all dispute management correspondence to the Razorpay dashboard. Henceforth, responses received via email will not be considered.

 Click here to know how to respond to chargebacks on the Razorpay Dashboard. 

You can click on the below to perform the following actions:

Features of Dispute dashboard

  • Provides comprehensive dispute management, merchants can view, accept, and contest disputes and chargebacks directly from the dashboard.
  • Merchants receive real-time notifications for chargebacks and disputes. 
  • It is a one stop solution, centralized platform simplifies the process of managing disputes by providing all necessary information in one place.
  • The need for managing disputes via email is eliminated. 
  • For a seamless chargeback experience , merchants can integrate the dashboard with their systems by using Razorpay’s Dispute API’s.

Benefits of Dispute dashboard

  • The dashboard allows merchants to easily review the status of chargeback reversals.
  • The dashboard provides tools to help merchants resolve reconciliation issues.
  • The faster resolution on the TAT for closing the chargebacks.

How to avoid Chargebacks?

As mentioned above, most of the chargeback cases come up due to miscommunication between the buyer and the seller. 

Here are a few tips that you can keep in mind to avoid chargebacks.

  • Transparent Return Policy: Making sure the return policies are clearly mentioned on the website
  • Constant & Clear Communication: Keep customers updated regarding the status of their order
  • Proofs of Delivery: Share tracking numbers, invoices and all other order related docs and references with your customers

Chargebacks on International Transactions 

Cross-border e-commerce can be a great way to boost sales and widen your reach to new markets and prospective buyers. But it also comes with risks related to transaction fraud,  identity theft fraud & fraud related to misuse of policies among other risks.  Therefore, every business that is looking to expand business across the border, needs to be aware upfront about what it is up against. Businesses usually cite cross-border payments fraud as one of their major concerns. 

Following is the elaboration on some of the key areas to be aware about and to remember before starting to accept cross border business:  

1. Type of Authentications for International Transactions (3DS Vs Non-3DS) :

3D Secure (3DS) is an additional security step of authentication of the card (as well as the cardholder) that is initiated every time the card not present (CNP) / online transaction is made. It enhances the security measures for both the shoppers and the merchants. The 3DS authentication can happen through various means including but not limited to PIN, One-Time-Passwords, Static passwords among others. On the other side, the Non-3DS transactions are those wherein the card is not authenticated with an additional security of the 3DS. Since the card / cardholder is not verified and authenticated in such a type of transaction, it carries a heightened risk of the transaction being reported as fraudulent or even being charged back. While the participation into the 3DS authentication programs by the card networks is a prerogative of the cardholder and/or the card issuing institution, a well-informed and diligent decision is still to be made by the merchants regarding their participation in cross border card transactions, especially the non-3DS ones. The stakeholders on the acquiring side of the transaction have very limited rights of defending against chargebacks on the non-3DS transactions that are reported as frauds.   

2. What is a Cross Border Transaction chargeback?

An international chargeback is a request made by a cardholder or issuing bank to reverse a transaction that was made using a card instrument (credit , debit or prepaid) that is issued outside of India (International issuance). This request is made when the cardholder disputes the transaction, either because they did not authorize it or because they are dissatisfied with the goods or services they received amongst several other reason codes.

3. How does a Cross Border Transaction differ from a domestic transaction chargeback?

An international chargeback is a chargeback that involves a transaction made in a different country than the issuing bank. This can be more complex than a domestic chargeback because it involves currency conversion and may involve different laws and regulations applicable to the country of merchant/Cardholder/Delivery destination.

4. How do I prevent International Payment Transaction chargebacks?

There are several steps you can take to prevent international chargebacks:

  1. Clearly communicate the terms & conditions of the transaction and refunds/returns related to it in a clear and concise way to the cardholder, including the price and any fees or taxes
  2. Ensure that the cardholder has authorized the transaction
  3. Provide high-quality goods or services that meet the expectations of the cardholder
  4. Respond promptly to any customer complaints or disputes

5. How can a merchant resolve an International Transaction chargeback?

If you receive a request for an international chargeback, it is important to respond promptly and provide any relevant documentation to support your case. This may include (but not limited to): 

  1. Proof of cross border delivery 
  2. Customs clearance copy,
  3. Proof of authorization by customer
  4. A copy of the terms and conditions of the transaction etc.

If you are unable to resolve the dispute with the cardholder, you may need to seek legal assistance.

Financial Impact

  1. In the event that chargebacks remain unaddressed within the stipulated deadline or if insufficient documentation results in chargeback loss, a corresponding amount will be deducted or adjusted from the merchant. 
  2. Additionally, any fees and penalties imposed by the networks relevant to the chargeback stage will be recovered from the merchant.

Fees & Penalties for Dispute Stages

You are requested to keep a regular track of ever evolving guidelines of digital payment acceptance. Please make a note of the following table associated with fees and penalties. Your acknowledgement of the same is deemed: 

Associated Fees & Penalties for Dispute Stages
Card Networks UPI
No Dispute Stages Mastercard Visa Rupay
1 Chargeback NA NA NA NA
2 Pre Arbitration USD 15.00 USD 0.75 NA NA
3 Arbitration USD 520.00 *USD 600.00 Rs 3000.00 Rs 500.00

 

*Note- Visa has updated the Arbitration Penalty fees from $500 to $600. The change in arbitration fee will be effective from 01st October 24 onwards.

Deduct at Onset (DAO)

When the dispute is initiated, Razorpay will deduct the disputed amount from the merchant’s account. In the meantime, until the chargeback gets resolved, this deduction covers future liabilities. This process is usually followed by the payment gateway to guarantee that there is enough money to cover any disputed transactions and to adhere to legal and regulatory standards. The funds that are/were withheld is returned to the merchant’s account after the chargeback concludes in the merchant’s favor. 

Contact Information

You can reach out to the Chargebacks Team via email id chargebacks@razorpay.com for any chargeback related queries.

To ensure important information is not flagged as junk or spam, kindly whitelist this email ID.

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