Definition
A dispute arises when a shopper challenges a transaction previously made with their card issuer. This automatically triggers an internationally defined process.
A dispute arises when a shopper disputes a previously completed transaction with their card issuer. This automatically triggers an internationally defined process.
In a first step, the transaction amount including a dispute fee is temporarily deducted from your account and refunded to the shopper. You as the merchant then have the opportunity to submit evidence to prove the validity of the payment.
If the dispute is decided in your favor, the transaction amount and the fee will be refunded to you. If the decision is in favor of the shopper, the money collected will be lost to you.
Disputes are also referred to as disputes, chargebacks or payment disputes.
Involved parties
In addition to you as the merchant, the shopper, the shopper bank, the merchant bank and Payrexx are always involved in a dispute. Here you can find out who has which role.
Credit card holder/shopper
The shopper or credit card holder who has made and paid for a purchase. In individual cases, for example if a credit card has been stolen, the credit card holder and shopper may be two different people.
Other terms: buyer, customer, end customer, cardholder
Merchant
The online or POS store where the shopper has paid - for example, you.
Other terms: seller, retailer
Shopper bank
The shopper bank is the financial institution that issued the credit card to the shopper. It makes the decision in the event of a dispute.
Other terms: issuing bank, issuer, card issuer
Acquiring partner
As a payment provider or payment facilitator, we work with partner merchant banks to process transactions. Depending on the payment method, we set up a merchant account with the relevant partner in the background. Since the merchant bank forwards transactions, it must meet strict requirements of the card schemes and the local financial supervisory authorities.
Other terms: acquiring bank, acquirer, merchant acquiring bank
Payrexx
As a payment provider, Payrexx plays a communicative role in the handling of disputes. We inform you about the opening of disputes, receive your evidence and forward it accordingly. We try to support you as a merchant as much as possible, but we have no decision-making power within the dispute process.
Other terms: payment service provider, payment facilitator
How disputes work
Disputes all over the world follow the following standard process:
The shopper recognizes discrepancies and contacts his bank.
The shopper's bank, the issuer of the credit card, notifies Payrexx of the complaint.
The disputed amount and a dispute processing fee are automatically deducted from the merchant's account (if there are no or insufficient funds in your merchant account, you will receive a corresponding invoice).
Payrexx notifies the merchant of the dispute and forwards all information received from the bank to the merchant via the dashboard and email.
The merchant now has the opportunity to provide evidence to show that the payment was legitimate.
The shopper bank makes the decision in whose favor the dispute is resolved. This usually takes place 60 to 75 days after submission of the evidence.
Payrexx has no influence on the outcome of a dispute. This makes it all the more important for us to provide you with the best possible support in this process.
Consequences of disputes
Disputes are a nuisance for every retailer, as they generate costs and personnel expenses in the short and medium term and damage the company's reputation in the medium and long term.
Financial losses
If a dispute is decided against you, you will not only lose the transaction amount. You will also be deducted a dispute fee of CHF/EUR 35.00. If you look at the dispute as a whole, it can easily cost you twice the actual transaction amount.
| Description | Costs |
|---|---|
Transaction amount | EUR 100.00 |
Transaction fee (e.g. 1.7 % + EUR 0.20) | EUR 1.90 |
Dispute fee | EUR 35.00 |
Acquisition costs (20 %) | EUR 20.00 |
Marketing and advertising costs (35 %) | EUR 35.00 |
Warehousing, logistics, processing (20 %) | EUR 20.00 |
Total costs | EUR 211.90 |
Source: Chargebackgurus.com
Increased chargeback rate
An increased chargeback rate, i.e. the ratio between sales and the number of disputes, can have a negative impact on your business success.
If your chargeback rate exceeds the threshold value defined by the card networks, your merchant account can be classified as high-risk, which has unpleasant consequences:
You pay higher transaction fees.
Your processing volume is limited.
Funds are held in reserve.
In some cases, the acquiring bank and/or Payrexx may terminate your account.
Deterioration of reputation
In the medium and long term, disputes have a negative impact on your company's reputation - even if you win a certain proportion of the disputes.
This is because opening a dispute often leaves its mark on online forums and review websites, which can negatively influence the behavior of existing customers and potential new customers.
According to Brightlocal's Local Consumer Review Survey 2023, 98% of respondents read online reviews at least occasionally when searching for a business. According to Qualtrics (2020), 94% of respondents say that a negative online review has convinced them to avoid a company.
It is not only lost disputes that have a negative impact on your company. Even disputes that are won have consequences, as they damage your reputation and their handling generates personnel costs.
Even better than winning a dispute is therefore to prevent it from arising in the first place. You can find out how to do this in the next chapter.
Last updated
