Introduction
As a user of any financial technology service, you must have had a scenario or two where you had to find a way to get your money back. This may be due to a failed transaction or you not getting value for your money.
The process of getting your money back is called a chargeback, more commonly known as a reversal.
This article explains a chargeback, its causes, resolutions, and more.
What are chargebacks?
A chargeback is a transaction reversal initiated by a customer’s bank. It occurs when a customer disputes a charge or transaction with their bank. Typically, the bank initiates a refund and returns the funds to the customer.
Chargebacks can happen for several reasons, like customer dissatisfaction, fraud, and sometimes technical errors.
Chargebacks are a consumer protection mechanism designed to address issues like fraud, unauthorized transactions, or dissatisfaction with products or services.
Key Players Involved:
- Cardholder: The individual who holds the credit or debit card.
- Merchant: The business that conducted the transaction.
- Issuing Bank: The bank or financial institution that issued the card to the cardholder.
- Acquiring Bank: The bank or financial institution that processes payments on behalf of the merchant.
Causes of chargebacks
The following are the likely causes of chargeback:
- Fraudulent Transactions: An unauthorized use of debit card information through identity theft or stolen card details can lead to chargebacks. The legitimate account/card owner can dispute transactions they did not authorize and get a refund.
- Fraud: This is when a customer initiates a chargeback without a valid reason. They may claim that they did not make a purchase or did not receive the goods/service or that they are not satisfied with the goods/service. This can be accidental or intentional, and it’s sometimes referred to as “friendly fraud.”
- Unsatisfactory Product or Service: Customers may dispute charges if they receive goods or services that do not meet their expectations or if there are issues with the product’s quality, condition, or description.
- Technical issues: Problems or technical glitches may happen during a transaction causing different issues like double debits.
- Billing issues: This is when mistakes are made in billing. A customer could be overbilled, or a subscription could be auto-renewed against the customer’s wishes. The customer may dispute such charges. This particularly occurs in subscription or auto-renewed transactions.
- Merchant errors: Merchants may make honest mistakes in billing, and a chargeback may be needed.
Resolution of chargebacks and funds disputes
When chargebacks happen, a resolution is needed and follows the process listed below:
- Initiation: The cardholder contacts their bank to dispute a specific transaction, providing reasons for the chargeback.
- Investigation: The issuing bank investigates the claim, considering evidence from the cardholder and the merchant. This may include transaction records, receipts, and communication between the parties.
- Resolution: If the chargeback is deemed valid, the funds are taken from the merchant’s account and returned to the cardholder. If the chargeback is rejected, the funds remain with the merchant.
How Remita handles chargebacks
For certain transactions, such as airtime, data, or electricity bill payments, if customers do not receive value, Remita initiates an automatic chargeback process, ensuring a refund in due time.
For non-typical bill payments requiring chargebacks, customers should email the Remita support team at [email protected] with details of the situation. The typical response time is 24 hours, during which the support team will provide further information or guidance on necessary steps.
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Conclusion
Chargebacks serve as a safety net for customers, safeguarding them from fraudulent or unsatisfactory transactions. However, for merchants, excessive chargebacks can have financial implications. Therefore, maintaining transparent transactions, excellent customer service, and effective dispute resolution processes is crucial.
Remita is dedicated to ensuring the protection of both merchants and customers, thereby guaranteeing smooth and uncomplicated business transactions.
