Find definitions and learn about the general application of common industry terms as they are used on this website.
Arbitration chargebacks, sometimes known as “second chargebacks” or pre-arbitration filings, occur when a chargeback dispute enters its penultimate stage, after the initial representment has been won or lost. At this point, the cardholder (via their issuer) or acquirer may provide new evidence to challenge the representment ruling, elevating the dispute to a higher stakes arbitration phase. While Mastercard uses the term “arbitration […]
Chargeback analytics are a range of data analysis techniques that can be used to prevent, reverse, understand, and manage chargebacks. These approaches usually use AI and machine learning models in combination with dispute-related data to gain insights into strategies that can positively impact dispute processes. While many chargeback management solutions offer analytics, it’s important to […]
Interchange fees are transaction fees paid by acquiring banks to issuing banks for processing credit and debit card payments. These fees are established by card networks like Visa and Mastercard, and typically combine a percentage of the transaction amount with a fixed charge. While merchants don’t directly pay interchange fees, they ultimately bear the cost […]
Merchant Category Codes (MCCs) are four-digit identifiers that classify businesses based on their products or services. Introduced by the IRS in 2004 and issued by the International Organization for Standardization (ISO), these codes serve as a universal system for identifying merchant types across the payments ecosystem. MCCs influence many processes, such as tax reporting, chargeback […]
A billing descriptor is a piece of identifying text that appears on a cardholder’s credit or debit card statement, providing information about a specific transaction. This short description typically features just the merchant’s name but may include additional details about the purchase. Billing descriptors serve as an important record and reminder of the cardholder’s transaction, […]
A card issuer, also known as an issuing bank, is a financial institution that provides credit or debit cards to consumers and businesses. Examples of card issuers include banks like JPMorgan Chase, Bank of America, and Citibank, as well as credit unions and prepaid card providers. These institutions are responsible for approving credit card applications, […]
A chargeback reversal happens when an issuing bank overturns its initial decision to approve a chargeback claim and returns the disputed funds to the merchant. This occurs after the merchant successfully disputes the chargeback through the representment process by providing evidence that the original claim was invalid. How Chargeback Reversals Work When a cardholder files […]
A chargeback threshold refers to the upper limit of disputes per transaction a merchant can receive in a specified timeframe before they are penalized by a card scheme, acquirer, or other institution. Penalties may include fines, additional processing fees, more stringent monitoring, or even account termination. How Do Chargeback Thresholds Work? Chargeback thresholds typically take […]
A merchant account is a specialized bank account, offered by a PSP, payment processor, or acquirer, that allows businesses to accept payments from credit and debit cards. These accounts are established under “merchant agreements” that state terms of settlement between the business and acquiring bank, and require merchants to abide by card network rules. Merchant […]
Shopify chargebacks occur when a customer disputes a transaction made through a Shopify-powered online store. If the issuing bank judges the dispute to be valid, the disputed funds are immediately withdrawn from the merchant’s account along with a chargeback fee. As a comprehensive ecommerce platform and PSP, Shopify plays the role of acquirer throughout the […]
Friendly fraud occurs when legitimate cardholders dispute charges they actually authorized. Unlike true fraud (where criminals use stolen cards), these disputes come from your actual customers. “Accidental friendly fraud” happens when customers file disputes because they’re genuinely confused, not because they’re trying to get something for free. These cardholders believe they’re right to dispute a […]
An ACH dispute occurs when a party involved in an Automated Clearing House (ACH) transfer challenges the legitimacy of the transaction. These disputes are usually initiated when account holders contact their bank to report unauthorized or incorrect electronic fund transfers from their accounts. Unlike credit card chargebacks, ACH disputes are governed by the National Automated […]
An acquirer, also known as an acquiring bank, is a financial institution that processes credit and debit card payments for merchants. It processes transactions, settles funds, and serves as an intermediary between merchants, card networks, and issuing banks. Acquirers provide the necessary infrastructure and services for businesses to securely handle electronic payments, playing a vital […]
BNPL fraud refers to any activity that targets Buy Now, Pay Later options with the aim of obtaining goods or services without full payment. These fraud techniques exploit the unique structure of BNPL systems, which offer frictionless purchasing and delayed payment terms, but with more relaxed verification measures than traditional credit systems. As BNPL services […]
Buy Now, Pay Later (BNPL) is a payment solution that allows cardholders to purchase goods or services immediately while deferring full payment to a later date, typically through a series of installments. Merchants receive the full purchase price from the BNPL provider upfront, while the BNPL provider assumes responsibility for collecting payment from the consumer. […]
Card-Not-Present (CNP) chargeback fraud occurs when credit card details are used to make fraudulent transactions where the physical card isn’t presented to the merchant. CNP fraud predominantly affects online transactions, but also extends to phone orders, mail orders, and any payment where the card and cardholder aren’t physically present. Without visual verification of the card […]
Chargeback fraud, or “friendly fraud”, occurs when a cardholder disputes a legitimate transaction with their bank or card issuer, usually with the intention of keeping both the transaction sum and the purchased product or service. This practice costs businesses an estimated $132 billion annually and accounts for 70% of all credit card fraud. Moreover, chargeback […]
Chargeback mitigation refers to systems and techniques that reduce the frequency or impact of disputed transactions. Most common approaches combine preventative and responsive strategies to maintain acceptable chargeback ratios and recover lost revenue. While chargeback mitigation can be handled in-house, the global rise of friendly fraud – costing businesses $132 billion annually and accounting for […]
Compelling evidence refers to the data and documentation that merchants provide to prove the legitimacy of a disputed transaction. This evidence is used in the chargeback representment process, where merchants attempt to reverse a chargeback and recover lost revenue. Compelling evidence typically includes any written or electronic documentation, or other relevant data, that verifies the merchant […]
Rapid Dispute Resolution (RDR) is an automated dispute resolution program developed to streamline the chargeback process for certain types of transaction disputes, and currently offered by Verifi (part of Visa). RDR is designed to resolve potential disputes quickly and efficiently, before they escalate into formal chargebacks. The program uses predefined rules and transaction data to […]
