Chargeback representment: how to successfully reverse chargebacks

Andy Tweddle, Payments writer
20 May 2024

Chargeback reversals happens when a merchant successfully disputes a chargeback by providing evidence that the reason for the chargeback claim was invalid, and the bank restores the funds to the merchant’s account.

Chargeback reversals can be a complex affair, requiring merchants to have detailed evidence to hand, as well as time and resources to make their case to the banks. Give your brand the best chance of successfully overturning unfair chargeback requests by better understanding the reversal process. Deploying the right tactics will help make sure that issuing banks, who ultimately decide the outcome, view your case favourably.

Wondering what a chargeback is? Read our guide on how to reduce chargebacks first.

What is a chargeback reversal?

A chargeback reversal is when an issuing bank decides that, after investigation, a chargeback was either unfair or fraudulent. The transaction funds will then be returned to the merchant.

When a customer disputes a charge, banks and card card issuers typically favour customers over merchants, even though the consumer is meant to provide evidence in support of the chargeback. Unfortunately, this low barrier means chargeback fraud or friendly fraud happens regularly. Merchants in estimated that first-party chargeback misuse (AKA “friendly fraud”) accounted for half of their chargebacks in 2023.

If a bank decides to file a chargeback, they will notify the merchant via their acquirer. The merchant can then examine their records to see if the reason code for the chargeback is valid.

Reason codes categorise why a customer disputed a transaction. Examples include “Fraudulent transaction” if the customer believes they didn’t authorise the transaction or “Services not provided”, if they didn’t receive a product they paid for.

If you believe the reason for the chargeback is invalid, you — as the merchant — are permitted to dispute the chargeback through a process called representment.

What is chargeback representment?

Representment involves a merchant gathering all available information on the disputed debit or credit card transaction, such as receipts, delivery confirmations, and any other documentation, which can prove the transaction didn’t warrant a chargeback. It is then up to the bank to decide whether to honour the chargeback or issue a reversal by transferring the money from the cardholder’s bank to the acquiring bank (the merchant’s bank).

It’s important to note that even if a chargeback is successfully reversed, the merchant is still liable to pay the chargeback fee, usually around £10–20.

Why are chargebacks such a problem for merchants?

Chargebacks are time-consuming and costly. Each chargeback involves the refunded transaction amount and additional fees, including possible penalties. Disputing a chargeback also demands considerable effort and resources, which could be directed elsewhere in the business.

A high chargeback rate can lead to further consequences for merchants, as they may be subject to penalties and monitoring programs by card schemes, such as Visa and Mastercard, if their chargeback rate exceeds certain thresholds. So representment is an important skill for businesses to master. For Mastercard, merchants are put on their excessive chargeback merchant program if they reach 100 chargebacks and 150 ‘basis points’ in one month. Basis points are calculated by dividing the number of chargebacks by the number of the merchant’s Mastercard transactions in the previous month, multiplied by 10,000.

Tips for successful chargeback representment and reversals.

To succeed with a chargeback reversal, follow some straightforward tactics:

1. Flag and analyse chargebacks quickly

Chargebacks are typically sent to your business by email or post and come with strict deadlines for submitting a case for reversal — often 20–45 days — so it’s important to spot these notifications quickly and start uncovering the transaction details. The issuing bank will automatically reject late reversal submissions, regardless of how strong your case is.

2. Only pick chargebacks that are clearly unfair

The next step is to check the reason code for the chargeback. Visa and Mastercard have their own exact reason codes. Still, all card schemes will give you information on why the customer requested the chargeback, including customer disputes, fraud, authorisation errors, and processing errors. Midigator has an extensive database of chargeback codes.

There are several reasons why a customer can make a chargeback request, including:

  • card processing errors, such as being charged multiple times for the same purchase

  • the cardholder doesn’t recognise the transaction

  • merchandise or service differs from the description

  • received goods are defective

  • ordered goods aren’t received

  • agreed upon services did not take place

  • the seller has gone out of business, and so the customer cannot request a refund

When reviewing a chargeback, can you see that any of the above actually happened? If so, don’t fight the chargeback request. That was a valid chargeback request, and submitting representment will only make it more difficult to persuade the issuing bank in the future. In the future, consider how you can reduce legitimate chargeback requests.

3. Gather evidence and build your case

You now need to gather all the information you have on that particular transaction to discover compelling evidence that contradicts that code. For example:

  • If a customer claims a product was never delivered, look for proof of delivery

  • If a customer claims they were charged multiple times, look for that customer’s transaction history

  • If a customer claims merchandise differs from the description, provide evidence of clear and detailed product descriptions

  • If the customer claims they didn’t authorise the transaction, search for authorisation codes in your payment gateway

Evidence will likely be stored in different places across your organisation. Typical places to gather evidence include:

  • CRM software (eg Hubspot or Salesforce): here, you should be able to find customer information, product/service details, and browser information

  • Website or apps: this is where you’ll find terms and conditions, plus screenshots of how your product or service is presented to the customer

  • Payment gateways: here, you’ll find specific payment data, including payment authorisation codes and 3D secure information

  • Customer support apps: this is a good place to find any history of direct interaction with the customer. Did they reach out for help before submitting a chargeback request?

4. Submit your case to the issuing bank

Once you have gathered all the evidence you need to be satisfied that the chargeback was invalid, whether through fraud or simply a mistake on the customer’s part, you should submit your proof as a rebuttal letter.

Include all the case-specific information you have gathered. Each bank will have its own processes and documentation requirements, so check that you’ve included everything they requested.

And remember, the contents of your case will be read by your bank, the issuing bank and potentially even your customer. Make sure you keep the tone professional throughout, and don’t be tempted to say anything disparaging about the customer concerned.

Finally, state what you want the outcome to be. It may be obvious to you that you want the chargeback request to be overturned, but make sure the bank knows exactly what you expect.

5. Analyse your successful (and unsuccessful) reversal attempts

Over time, if you submit enough chargeback rebuttals, you can analyse where you are likely to get the chargeback successfully reversed. There could be certain reason codes where your case is always dismissed or issuing banks that reverse the chargeback more than others.

Assuming you don’t have time or resources to fight every chargeback effectively, focus your efforts on the chargebacks where you have seen success in the past. Tactics like highlighting different pieces of evidence or modifying your cover letter could help improve win rates where your cases are often dismissed.

Eliminate the chargeback process with open banking payments

With card payments, chargebacks will always be an issue for merchants. Chargebacks were originally intended to encourage consumers to use cards, but high fraud rates have turned them into a headache for businesses. Some payment processors even offer chargeback protection insurance.

Open banking payments — or pay by bank as it’s often called at checkout — offer a payment method that eliminates the risk of chargebacks altogether. TrueLayer’s Payments API enables shoppers to pay instantly in a few clicks, with strong customer authentication (SCA) seamlessly baked into the user experience. And with no card network involved, there is no chargeback process to manage in the first place.

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