What is the process of chargeback through a payment gateway?

A chargeback is a transaction reversal initiated by the cardholder's bank (issuer) in response to a dispute or claim regarding a payment made through a payment gateway. The chargeback process involves several steps, which are generally as follows:

1. Cardholder Dispute: The cardholder contacts their bank and raises a dispute regarding a transaction made through the payment gateway. The reasons for a dispute can vary, such as unauthorized transaction, goods or services not received, or dissatisfaction with the product or service.

2. Issuer Investigation: The cardholder's bank (issuer) reviews the dispute and initiates an investigation. They may request additional information from the cardholder to support their claim.

3. Issuer Notification: The issuer notifies the payment gateway about the chargeback request and provides the necessary details, including the reason for the dispute and supporting documentation if available.

4. Payment Gateway Notification: Upon receiving the chargeback notification, the payment gateway alerts the merchant about the dispute. The merchant may be required to provide evidence or documentation to defend the transaction, such as proof of delivery, customer communication, or transaction records.

5. Merchant Response: The merchant reviews the chargeback details and responds to the payment gateway within the specified timeframe. The response includes any relevant evidence or documentation to support their case and challenge the chargeback.

6. Acquirer Investigation: The payment gateway forwards the merchant's response and evidence to the acquiring bank (merchant's bank). The acquiring bank investigates the chargeback and evaluates the provided information.

7. Resolution: Based on the investigation and evidence presented, the acquiring bank makes a decision on the chargeback. If the chargeback is upheld, the funds are debited from the merchant's account. If the chargeback is successfully challenged, the funds are returned to the merchant.

It's important for merchants to actively monitor chargebacks, respond promptly to notifications, and provide compelling evidence to dispute invalid chargebacks. Proper documentation, clear communication with customers, and adherence to best practices can help minimize chargeback occurrences.

It's worth noting that the specific chargeback process can vary depending on the payment gateway, the acquiring bank, and the card network (such as Visa or Mastercard). Merchants should familiarize themselves with the chargeback policies and procedures of their chosen payment gateway to ensure they follow the necessary steps in managing chargebacks effectively.