Dispute process
This document outlines the structured workflow for managing payment disputes and chargebacks initiated by cardholders through their issuing banks. Please note: This guide is structured specifically for the default Payments AI gateway. Understanding this sequence is crucial for effective defense, recovery, and risk mitigation.
Payment Dispute and Chargeback Management Process Documentation
1. Introduction and Overview
The dispute process is a sequence of stages that a transaction may proceed through following a cardholder's challenge to a processed payment. Organizations must be prepared to respond efficiently at key trigger points.
The process often begins with optional notifications, leading to the formal initiation of a chargeback, which then cycles through defense, potential reversal, and final resolution.
Important Note: This section provides a conceptual overview of the dispute lifecycle and timeline.
If you are looking for step-by-step instructions on how to manage disputes within the user interface or specific evidence requirements, please refer to our technical guides below:
Actioning a Dispute: Submitting a Chargeback Representment
Evidence Guide:Chargeback Defense Requirements
2. Pre-Chargeback Notifications (Optional)
These steps are informational or pre-emptive and occur before a formal debit is applied to the organization's account.
| Stage | Description | Impact & Action |
|---|---|---|
| Notification of Fraud (NOF) | Alerts the organization to potential fraud activity (equivalent to Visa TC40 / Mastercard SAFE reports). | Impact: Informational; No funds are withdrawn. Action: Proactively issue a refund immediately, block the cardholder, and stop the shipment of goods. Core Benefit: If you issue a refund at this stage, the transaction is resolved before becoming a formal dispute. This ensures it does not count against your Chargeback Ratio. This protection is the core selling point of our default gateway. |
| Request for Information (RFI) | The card issuer formally requests additional transactional data from the organization before deciding to initiate a formal chargeback. | Impact: No funds are withdrawn. Action: Timely submission of all requested supporting documentation is mandatory to prevent automatic escalation to a chargeback. |
3. Core Dispute Workflow Stages
The core chargeback process begins when the issuer formally initiates the dispute. The flow is visualized in the accompanying diagram.
3.1 Formal Chargeback Initiation
| Stage | Trigger and Description | Outcome |
|---|---|---|
| Notification of Chargeback (NoC) | The issuer formally initiates the chargeback, which may follow an RFI or occur immediately after the transaction status is 'Settled' or 'Refunded.' The financial debit typically occurs shortly after receiving the notification. | Defense Strategy: The system automatically defends disputes with clear liability shift (e.g., 3D Secure fraud) or those on already-refunded transactions. For all other disputes, the organization must prepare and upload defense documentation via the User Interface (the Disputes API does not support document uploads). |
3.2 Resolution and Defense Cycle
Once the NoC is received, the process enters the resolution cycle, primarily driven by the organization's defense submission.
| Stage | Description | Resolution Track |
|---|---|---|
| 1st Chargeback | The disputed amount is formally debited (withdrawn) from the organization's account. | Finality: If the organization accepts the chargeback or fails to submit defense documentation, the process concludes here. |
| Information Supplied | The organization's defense documentation is compiled by Third-party-provider and submitted to the card scheme for review by the issuer. | Note: After submission, no further changes to the documents are permitted. |
| Chargeback Reversed | The issuer accepts the organization's defense, or the issuer's response timeframe expires, leading to a successful defense. | Finality: The disputed amount is credited back to the organization's account, concluding the dispute in the organization’s favor. |
| Pre-arbitration | If the issuer rejects the organization's initial defense, they may escalate to this internal review stage (applies only to Visa, Diners, and Discover). | Third-party-provider reviews the pre-arbitration case to determine the strength of the issuer's claim. |
| 2nd Chargeback | Occurs if the issuer successfully declines the organization's defense or Third-party-provider accepts the pre-arbitration. | Finality: This is the final debit stage. No further defense documentation can be submitted by the organization, concluding the entire dispute process. |
4. Organization Responsibilities
| Action | Timing | Responsibility |
|---|---|---|
| Proactive Fraud Mitigation | Immediately upon receiving an NOF. | Issue refund, halt shipment, block shopper. |
| Data Provision | Promptly upon receiving an RFI. | Provide all requested transactional evidence. |
| Defense Submission | Within the scheme-mandated timeframe after receiving a NoC (if not auto-defended). | Upload all required evidence (invoices, proof of delivery, communication logs). |
| Acceptance | Any time before the defense submission deadline. | Allow the 1st Chargeback to stand, accepting the loss. |
5. Dispute Timeframes and Service Level Agreements (SLAs)
5.1 General Principles
Timelines for the dispute lifecycle vary strictly by card scheme and payment method. Adherence to these deadlines is critical; missing a submission window results in an automatic loss of the dispute and financial forfeiture.
- Standard Initiation Window: Generally, cardholders have 120 days from the transaction date to raise a dispute.
- Extended Initiation Window: For specific scenarios involving future delivery (e.g., travel, pre-orders), Visa and Mastercard allow up to 540 days from the transaction date.
5.2 Scheme-Specific Deadlines
The following matrix details the operational windows for responding to inquiries and chargebacks. All days refer to calendar days.
| Scheme | RFI Response Deadline | Chargeback Initiation Limit (From Tx Date) | Defense Submission Deadline (From NoC Date) | Final Decision Window (From Defense Date) |
|---|---|---|---|---|
| Visa (Allocation/Collab) | N/A | 120 days | 9 or 18 days (See Note 5.3.1) | 60 days (Collab) / 45 days (Alloc) |
| Mastercard | N/A | 120 days | 40 days | 70 days |
| American Express | 14 days | 120 days | 14 days | 50 days (See Note 5.3.2) |
| Discover | 18 days | 120 days | 25 days | 80 days |
| Diners | 18 days | 120 days | 25 days | 60 days |
| JCB | 18 days | 120 days | 40 days | 35 days |
| CUP (UnionPay) | 30 days | 180 days | 30 days | 20 days |
| Affirm | N/A | 120 days | 15 days | 30 days |
| Afterpay / Clearpay | 13 days | 60 days | N/A | 30 days |
5.3 Critical Scheme-Specific Exceptions
Certain schemes utilize unique workflows that deviate from the standard chargeback lifecycle. Development logic must account for these exceptions to avoid financial loss.
5.3.1 Visa: Regional Response Updates
The defense window for Visa depends on the region and date:
- Global Standard: 18 days.
- US & Canada (Effective July 21, 2025): The window tightens to 9 days for domestic transactions. Legacy disputes (pre-July 21) retain the 18-day window.
5.3.2 American Express: Defense & Reversal Logic
- Process: Defended disputes remain in the
Information Suppliedstage. The financial impact (debit) occurs early. - Resolution:
- Loss: If Amex rejects the defense, the status remains as the final chargeback.
- Win: Status changes to
ChargebackReversed, and funds are credited back.
- Reopening: Amex retains the right to reopen closed cases. This triggers a
SecondChargebackevent, which is immediately final.