Handling Disputes and Chargebacks with SHOPLINE Payments

If you accept credit cards with SHOPLINE Payments, you will likely need to deal with credit card transaction disputes. A transaction dispute means a business deal is disputed by a credit card holder or issuing bank (issuer). Customers can file transaction disputes out of different reasons, such as not receiving products or services, defective products, unrecognizable businesses, fraudulent transactions, among others. 

Since online transactions do not require the physical presence of credit cards to validate the card owner's details, the possibility of a transaction dispute is relatively high.

Learn what are the common transaction dispute types, how to handle them, and how to prevent frauds in this article. 

Types of Transaction Disputes

Transaction disputes typically involve cardholders disputing a charge with the issuing bank (issuer). Currently, credit card transaction dispute types mainly include retrieval and chargeback.

Retrieval

A retrieval occurs when a cardholder disputes a credit card charge and requests the issuing bank to inquire about the order details. However, the bank does not immediately refund the disputed amount to the cardholder. Instead, SHOPLINE Payments team reaches out to you via email that there is a retrieval to be handled. You will need to provide evidence and submit it to the SHOPLINE Payments team within two days. Otherwise, the retrieval may be escalated to a chargeback.

 

Chargeback

In most cases, cardholders would initiate a chargeback directly instead of a retrieval. When that happens, the bank will immediately freeze the disputed amount and a chargeback fee will be charged. The disputed amount, along with the chargeback fee, will also be frozen in your SHOPLINE Payments balance accordingly. You will need to provide the evidence timely and submit it to the SHOPLINE Payments team, or you may not receive the disputed amount as part of your sales.

Handling Disputes

Disputes may be raised for various reasons. See the next section for common reasons and best practices. 

Common procedures for handling retrievals

1. The cardholder disputes a charge with their bank.
2. The bank initiates a retrieval request. At this point, the bank does not freeze the disputed amount from you.
3. The bank requires SHOPLINE Payments to prove the charge was valid.
4. You gather evidence to determine whether the charge was valid and submit it to SHOPLINE Payments.
5. SHOPLINE Payments forwards your response and documents for the retrieval to the bank.
6. The bank reviews the evidence, and notify you and  SHOPLINE Payments of the outcome of the request.

Common procedures for handling chargebacks

1. The cardholder disputes a charge with their bank.
2. The bank initiates a chargeback request, and, in the meantime, freezes the disputed amount and a chargeback fee from you.
3. The bank requires SHOPLINE Payments to prove the charge was valid.
4. You gather evidence to determine whether the charge was valid and submit it to SHOPLINE Payments.
5. SHOPLINE Payments forwards your response and documents for the chargeback to the bank.
6. The bank reviews the evidence, and notify you and  SHOPLINE Payments of the outcome of the request.

Measures you can take to resolve a retrieval or chargeback

You will receive our email notification regarding the dispute. Each dispute email includes order details of the disputed payment and specific reasons reported by the cardholder to the issuing bank. You can resolve a retrieval or chargeback in the following ways:

• Contact the customer: You can reach out to the customer who placed the order via phone or email to understand the reasons and see if the issue is or can be resolved. If the customer agrees that the dispute isn't necessary, they will have to contact their bank and ask them to drop the dispute. You should also submit evidence that shows that the customer agreed to drop the dispute.
• Inspect the details: You can log in to your SHOPLINE Payments account, locate the specific disputed transaction, and follow the instructions to choose whether to accept the chargeback or submit defense documents. Defense documents may be returned for revisions, so please make the required modifications within the specified time frame.
• Provide additional evidence: After the cardholder's bank initiates a retrieval or chargeback, you have up to 2 days and 7 days respectively to submit evidence that the charge was valid.
  The evidence you should submit depends on the reasons why the cardholder asked for a retrieval or chargeback. Ensure your evidence is relevant and consider including the necessary information, such as proof of customer authorization, and item delivery. You can also submit the terms of service and refund policy which is shown on your website.

• Accept a chargeback: If you acknowledge that the chargeback is justified, then you can accept it by not submitting any evidence. The disputed amount will be returned to the customer, and the chargeback fee of this transaction will be deducted from your SHOPLINE Payments account.

  Note: If you receive an email about a chargeback while your store is closed or password-protected, then you need to follow the link in the email to log in and purchase a new plan to reopen the store. Once you reopen your store, you can submit additional evidence for the chargeback. If you don't reopen your store, then only basic transaction information is submitted along with the chargeback.

• If you receive an email about a chargeback while your store is closed or password-protected, then you need to follow the link in the email to log in and purchase a new plan to reopen the store. Once you reopen your store, you can submit additional evidence for the chargeback. If you don't reopen your store, then only basic transaction information is submitted along with the chargeback.
• Issue a refund to resolve a retrieval: If you acknowledge that the reason behind a retrieval is justified, then you can issue the customer a full refund for the order to close the retrieval. However, be aware that a full chargeback may still occur should you issue a partial refund. On the other hand, If you issue a full refund, then the cardholder won’t be able to initiate a chargeback.
• Submit defense documents: You can log in to your SHOPLINE Payments account, locate the specific disputed transaction, and follow the instructions to choose whether to accept the chargeback or submit defense documents. Defense documents may be returned for revisions, so please make the required modifications within the specified time frame.

Processing Klarna Disputes

Once a customer reaches Klarna to open a dispute case, they will be immediately guided to reach out to you for resolution before any intermediation from Klarna.

Klarna disputes may go through two stages and have multiple different statuses. The process will generally follow the flow below.

Stage 1 - RFI

There will be an RFI (Request For Information) dispute case appeared in your SHOPLINE Payments account. You then have 21 days to resolve the case (“Resolution Time”) with your customer. Unauthorized purchases will be moved directly to the Chargeback stage due to urgency. 

No dispute fee will be charged if the dispute is resolved in the RFI stage. Klarna disputes resolved in the RFI stage will also not count toward your chargeback ratio.

During the RFI stage, a dispute can have one of the following statuses:

• RFI created: You can either reach out to the customer to resolve the issue, or accept the dispute directly by refunding the Klarna payment. 
• RFI complete: The 21-day timeframe of Resolution Time has passed and Klarna will determine if a dispute is still valid.
• RFI canceled: The dispute has been canceled by the customer or Klarna. 

Stage 2 - Chargeback

If you and the customer can't reach a solution on your own within the given Resolution Time, Klarna will step in to investigate. If they believe that the dispute is still valid, Klarna will escalate the dispute to the Chargeback stage. At this point, you can submit relevant information and files to defend the case (see the previous section for details).

Reasons for A Retrieval or A Chargeback

Each issuing bank defines hundreds of specific chargeback codes, each representing detailed reasons for disputes. SHOPLINE Payments has summarized the common codes into seven classifications, which can better assist you in submitting the corresponding evidence.

Products or Services not received

For the chargeback marked as “Products not received”, you should try to contact the customer first to understand the problem. If the problem is or can be resolved, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

How to prevent it:

• For physical products, promptly ship them after payment is made.
• Estimate shipping and delivery dates as accurately as possible, and communicate clearly with your customer. If shipping delays arise unexpectedly, keep your customer informed.
• Save shipping labels, and for high-value products, consider requiring a signature of the customer upon receipt.
• Make it easy for your customers to contact you when they have issues receiving their products.

If you can't reach an agreement with your customer, then you should submit the following evidence:

• The date and time that you fulfilled the order
• The billing information that the customer used
• The shipping address that the customer used
• Shipping or delivery information of the order
• An activity log that shows that the customer has accessed the relevant product or service If the product or service was digital
• Any other evidence that helps to win the dispute

Product unacceptable

For the chargeback marked as “Product unacceptable”, you should try to contact the customer first to understand the problem. If the problem is or can be resolved, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

How to prevent it:

• Ensure that the descriptions of products or services shown in advertisements, your online store, or transaction receipts are accurate, complete, and not misleading.
• When shipping physical products, please ensure that the packaging and delivery methods can protect the products from being damaged.
• Never refer cardholders to the manufacturer to resolve the issue directly. In fact, the business selling the product is liable and should proactively solve problems.

If you can't reach an agreement with your customer, then you should submit the following evidence:

• The date and time that you fulfilled the order
• The billing information that the customer used
• Shipping or delivery information for the order
• Descriptions or pictures of the products from your store that prove that they were as described
• Any other evidence that helps to win the dispute

Credit  not processed

For the chargeback marked as “Credit not processed”, where the customer claimed that the purchased product was returned or that the transaction with you was canceled, but you have not yet refunded or credited the customer, you should try to contact the customer first to understand the problem. If the problem is or can be resolved, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

How to prevent it:

• Have a clear return or cancellation policy that’s easy to find or explicitly disclosed to the customer prior to purchase
• Honor your written policies promptly when a customer requests and is entitled to a full or partial refund

If you can't reach an agreement with your customer, then you should submit the following evidence:

• Your refund and return policies
• Any emails or notifications you sent to the customer about the refund
• An explanation of why the customer was not entitled to a refund
• Any other evidence that helps to win the dispute

Duplicate

For the chargeback marked as “Duplicate (charges)”, If it is legitimate, you should try to contact the customer and kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

How to prevent it:

• If the customer’s credit card is accidentally charged more than once for a single payment, refund the duplicates immediately.
• Send detailed receipts explaining each payment and make it easy to distinguish the unique reason for each payment made.

If you can't reach an agreement with your customer, then you should submit the following evidence:

•  An explanation of the reason for the two or multiple charges
• Receipts that show that the two or multiple charges were for different products.
• Any evidence of communication with the customer that makes the customer aware of the detail of the charges
• Any other evidence that helps to win the dispute

Unrecognized

For the chargeback marked as “Unrecognized”, where customers don't recognize the transaction details on their credit card statement, and sometimes they might have forgotten about the purchase, or that a friend or family member made the purchase on their behalf, you should try to contact the customer first to understand the problem. If the problem is or can be resolved, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

How to prevent it:

• Make sure your statement descriptor is easily recognizable to your customers and reflects the URL or business name they would associate with their purchase.
• Send receipts upon payment so your customers can recall what they paid for.

If you can't reach an agreement with your customer, then you should submit the following evidence:

• The date and time that you fulfilled the order
• The billing information that the customer used
• The IP address and country/region of the order
• Shipping or delivery information for the order
• Any other evidence that helps to win the dispute

General

For the chargeback marked as “General”, you should try to contact the customer first to understand the problem. If the problem is or can be resolved, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback.

If you can't reach an agreement with your customer, then you should submit the following evidence:

• Details about the products that were ordered
• The date and time that the order was fulfilled
• The customer's billing information
• The customer's IP address and country/region
• Emails or other communication you had with the customer
• Shipping or delivery information for the order
• Proof of prior refunds or replacement shipments
• Any other evidence that helps to win the dispute

Fraudulent

For the chargeback marked as “Fraudulent”, where cardholders claim they didn’t authorize the payment,  you should try to contact the customer first to understand the problem. The customer might have forgotten about the purchase, or a friend or family member made the purchase on their behalf. If the customer agrees that the charge was justified, then kindly instruct your customer to contact their bank to drop the chargeback. You should also submit evidence that the customer has agreed to drop the chargeback. Learn best practices for preventing frauds in the next section.

If you believe the customer is mistaken or not truthful, then you should submit the following evidence:

• The date and time that the order was fulfilled
• The billing information that the customer used
• Emails or other communication you had with the customer
• The IP address and country/region of the order
• Shipping or delivery information for the order
• Any other evidence that helps to win the dispute

Preventing Fraudulent Transactions

Any transactions that are without the cardholder’s authorization are regarded to be fraudulent transactions. Fraudulent transactions may lead to chargebacks and cause you losses. During the transaction process, you should try to look for any unusual aspects and take action accordingly.

Products are shipped to the same address despite orders are placed by different customers

In cases where orders are placed through different IPs, user names, email addresses, and regions but are sent to the same shipping destination, there is a high possibility of fraudulent orders. You can use the billing information to contact the customer and determine if it's a fraud case.

Orders with a much larger transaction amount than usual

If you receive an order where the value is much higher than usual, you should contact the customer and verify their identity and gain an understanding of the actual reasons behind this big transaction. You should be vigilant for any non-logical demands or unreasonable explanations.

Verify if the IP address matches the shipping address

The IP address used by a fraudster when placing an order may not match the shipping address. You can use Google Maps and free tools like WhatIsMyIP.com to quickly check the validity of a specific IP address. You can also examine the distance between the recipient address and the IP address. If there is a significant distance between the two addresses (e.g. different countries), then you have to be vigilant. Of course, if the purchase is for gifts or made on behalf of others, then the two addresses are acceptable.

Orders contain high-value products that are easy to resell or monetize

Electronic products, especially branded ones, are easier to resell for cash. Merchants selling high-value products are more prone to fraudulent attacks. Under such circumstances, you can also inquire about the order through a phone call by asking simple questions to see how the customer responds. For example, you can double-check the order’s shipping address, phone number, name, and other information that can help confirm the identity.

Orders that requested “expedited” or “within 24 hours” deliveries

Fraudsters aren't concerned about shipping costs, and they always request for “expedited” or “within 24 hours” delivery. You should be very vigilant of such behavior. For physical items, it is generally advised to delay shipment by 24 to 48 hours. This delayed shipping time allows the cardholder the opportunity to notice and report fraudulent activities on their account. Under such circumstances, while you may still receive fraud dispute reports, at least you won't lose the products.

Validate the email address

Looking up the email address on Google or any other search engine can reveal if the email address was used in documented fraud attempts. You might also be able to find social media posts or other information that ties the customer to the email address.

Call the phone number on the order

Fraudulent customers often use invalid phone numbers. If someone answers the phone, then ask them some simple questions about their order and see how they respond. Do they know the addresses, phone number, emails, and names they used? Are they struggling to give you simple pieces of information? Confirm with the customer that the transaction is legitimate (remember to keep a record of the communication) before proceeding to the shipment. You can also use a service such as 411.com to make sure the phone number is located in the same area code as the billing address. 

Set up 3D verification  

3D verification is a service provided by credit card companies to help customers shop online securely. It is an authentication system between card issuers, acquirers, and businesses that ensures transactions are processed safely. When making an online purchase, cardholders must enter a preset PIN, similar to entering a PIN at an ATM, to prevent credit card fraud. 

After customers enter their credit card information (name, card number, expiration date, and security code) and submit it, they will be taken to the 3D verification page. They can then choose to receive a dynamic verification code via SMS or enter a static verification code preset in their online banking. The issuing bank will verify the information and the code, and once confirmed, the payment will be authorized and completed.

The Purpose of Reserved Funds

The reserved fund is used to prevent a negative balance in your SHOPLINE Payments account due to disputes or refunds. We will reserve a percentage* from the successful transactions of your online store as a deposit, which will be used in case of refund/disputed transactions. 

If there is no need to use the reserved fund, we will release the fund after a certain period* , and transfer it to your bank account as the usual payout. 

The SHOPLINE Payments team shall review every business on a case-by-case basis. If a percentage of funds should be reserved for your business, SHOPLINE Payments team shall inform you in advance.