A chargeback is a reversal of a payment made to a merchant, back to the customer's bank account. The reversal is done by the customer’s bank, at the request of the customer and it is used as a form of consumer protection to secure the customer's interest in wrongful transactions. This means a customer has a right to file a chargeback for a transaction if there is a valid reason to do so.
Chargebacks are different from refunds. In the case of a refund, the customer reaches out to the business to ask for a refund, which may or may not be honoured depending on the business' policy. However, for a chargeback, the customer contacts their bank directly to forcibly reverse the transaction.
Why would a customer file a chargeback?
Customers file chargebacks when they do not receive a product or service they paid for. Also, it could be a case of receiving the product in poor condition, or getting something entirely different, this means they will be unable to use it for what it was intended. Another reason why a customer might file a chargeback is when they did not authorise the transaction in question, that is, being a victim of fraud. There is also the possibility that a chargeback is filed in error, perhaps the customer does not recall that they made a purchase.
How are chargebacks filed?
To file a chargeback, the customer simply has to reach out to their bank and highlight the transaction(s) in question and their bank will begin the process. When the customer’s bank receives the chargeback claim, they escalate this to the merchant or the merchant's bank, who then informs the merchant. The merchant has the opportunity to respond to the chargeback either by accepting it, or declining it with sufficient evidence that proves value was given to the customer for that transaction.
As a Paystack Merchant, how do I find my chargebacks?
The customer’s bank sends a chargeback claim to Paystack through our bank, we then log this immediately on your dashboard, on the Disputes page. Here is an illustration of how this page looks:
You also get an email notification informing you that a chargeback has been logged; the email will capture the transaction reference, date and time of the transaction, as well a link that takes you directly to the chargeback on your dashboard. The email you receive will look like this:
All chargeback claims logged on your dashboard have to be responded to within 16 hours of receiving them. If no action is taken within the 16-hour time frame, we will automatically accept the claim, this means we will deduct the disputed amount from your pending payouts.
Important to Note:
All chargeback notifications are sent to the Disputes email you set in the Contact section of your Compliance page. It is very important that this email is one that is regularly reviewed by someone in your organisation that can respond to chargebacks. This is so you do not lose money to wrongful chargeback claims.
How do I respond to chargebacks?
You can only respond to chargebacks from your Paystack Dashboard, this is done on the Disputes page. This is so we can properly track and manage your chargeback claims. Depending on your unique scenario you have the option to accept or decline a chargeback, here is what this means:
Accepting a chargeback: This means you successfully received the customer’s payment but did not provide the service or product the customer paid for. This could be for several different reasons due to technical issues or human error. When you accept a chargeback, you allow for the funds to be deducted from your payouts and reversed to the customer’s bank account.
Declining a chargeback: This means you successfully received the customer’s payment and have provided a service or delivered the product to the customer. To justify this, you will need to upload a form of evidence to support your claim, such as a receipt or invoice, anything that proves value was provided. If the evidence is not sufficient, we will automatically accept the chargeback.
Find below an illustration of how to respond to chargebacks:
What kind of evidence should I provide to decline a Chargeback?
This varies depending on the type of business you're into, as different businesses give value in various ways. However, whatever document you upload as evidence should have the following:
- the disputed transaction amount
- the date the disputed sum was successfully paid and received by you
- the name of the beneficiary of the transaction
- a brief description of the service or service delivered to the customer
Here is a good example of a document you can use to decline a chargeback:
Important to Note:
When providing evidence to decline chargebacks, it is important that it captures the details of the transaction and the customer to be sufficient. Kindly note that text messages and emails citing conversations with the customer will not be sufficient to decline chargebacks.
Here is a list of various types of evidence you can use to decline chargebacks, depending on your business, one or more of these will be suitable for you.
- Signed Invoices (electronic or paper)
- Sales receipts (electronic or paper)
- Delivery confirmation documents
- Service usage times, dates, etc
- Proof that a digital product was downloaded by the customer
Other essential practices when providing evidence
- Please make sure documents are clear and legible. Illegible documents may not be admissible and could lead to a financial loss if funds are reversed to the customer.
- Where applicable, make sure documents uploaded only contain details about the specific transaction that is being disputed. Please crop out any data that pertains to other transactions and other customers.
- Make sure to upload all relevant documents pertaining to a chargeback the very first time as there may not always be room for the chargeback to be re-opened.