Dispute Management
This Implementations resource provides information on dispute management and chargebacks.
A dispute generally occurs when a customer is unsatisfied or unfamiliar with a payment charged to their card and contacts their issuing bank for more information or to force-refund the transaction. Disputes affect Merchants of all varieties and can have a major impact on their bottom-line.
When a dispute occurs, the Merchant generally has the opportunity to accept liability - i.e. voluntarily concede to the dispute - or respond to the issuing bank with compelling evidence validating the transaction (representment). The cardholder’s issuing bank will make the final determination based on the evidence provided by both sides, and Merchants should use this guide to understand the dispute process and how they can respond.
Regardless of the outcome, a Merchant may be liable for non-refundable processing fees when a dispute is initiated against them. The fee amount depends on their portfolio’s pricing agreement with Payrix, as well as the custom fee configuration implemented by the Pro Client.
Key Terms
Cardholder: The customer that is disputing a transaction
Merchant: Provided the goods or services being disputed
Issuing Bank: The bank that issued the card to the customer (i.e. the cardholder’s bank)
Card Brand: The card brand the customer’s card is associated with (Visa, Mastercard, Amex etc.)
Representment: The response a Merchant sends to the issuing bank when a transaction is disputed
The Dispute Cycles
Disputes are categorized into three different and distinct cycles:
Although the official terminology varies slightly depending on the Card Brand, this is how each of these unique dispute cycles are referred to within the Payrix Platform & Portal. Depending on the dispute cycle, there are different actions available for the Merchant to take, and different potential outcomes of the dispute.
Retrieval
A retrieval is when the cardholder contacted their issuing bank requesting more information about a transaction, but did not request a forced-refund of the transaction. Meaning, the cardholder simply does not recognize the Merchant’s name or the transaction as it appears on their statement and would like clarification. Therefore, the issuing bank initiates a retrieval and requests that the Merchant provide documentation verifying the transaction details.
Because a retrieval is not an actual chargeback of the payment, no funds are deducted from the Merchant’s Payrix balance during this dispute cycle. However, Merchants still have the opportunity - and are recommended to - send a representment with relevant documentation clarifying the transaction details.
If a Merchant fails to respond to a retrieval it may escalate to a chargeback. If escalated to a chargeback, the Merchant will notice a new dispute in Payrix, with Cycle status of First Chargeback.
Although a retrieval may escalate to a chargeback, it is not a pre-requisite step for the cardholder. In simple terms, a cardholder may skip the retrieval cycle altogether and initiate a chargeback from the onset.
Dispute Cycle | Merchant Actions | Possible Outcomes | Card Brands |
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Retrieval |
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Retrieval processing flow
This diagram illustrates the processing flow for a retrieval dispute.
First Chargeback
When a First Chargeback is initiated against a Merchant the funds are immediately deducted from their Payrix balance and held until the issuing bank makes a final determination. If the Merchant does not have sufficient offsetting transactions or funds in their Available Balance, their bank account may be debited to cover the disputed amount.
If the Merchant ultimately wins the dispute, the funds will be returned to their Payrix balance (less any non-refundable fees associated with disputes).
A First Chargeback occurs when a cardholder seeks a forced-refund from their issuing bank for a transaction that they are disputing. There are numerous reasons that can cause a cardholder to initiate a chargeback, and during the First Chargeback cycle the Merchant’s response options are:
accept liability - i.e. voluntarily concede to the dispute & the held funds are credited to the cardholder
representment - i.e. send compelling evidence to the issuing bank representing their side of the dispute and validating the payment
Ultimately, the cardholder’s issuing bank will determine the outcome of a First Chargeback based on the evidence provided by both sides.
Dispute Cycle | Merchant Actions | Possible Outcomes | Card Brands |
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First Chargeback |
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First Dispute processing flow
This diagram illustrates the process flow for the most common dispute scenario, a First Chargeback.
Pre-Arbitration/Second Chargeback
When a payment is disputed and the issuing bank rules in favor of the Merchant during the First Chargeback cycle (won), the cardholder still has the opportunity to present new evidence to the issuing bank that could result in a second chargeback of the same transaction. This is commonly referred to as Pre-Arbitration. When this occurs, the issuing bank and the Merchant - should they choose to accept arbitration - send their respective new evidence to the Card Brand to arbitrate the dispute.
After the Merchant won the First Chargeback, the relevant funds were credited back to their Payrix balance (less any non-refundable dispute fees). If a subsequent Pre-Arbitration occurs, the funds will, once again, be immediately deducted from the Merchant’s Payrix balance and held pending the Card Brand’s Pre-Arbitration decision.
If they do not have sufficient offsetting transactions or funds in their Available Balance, their bank account may be debited to cover the disputed amount. If the Merchant ultimately wins the Pre- Arbitration dispute, the funds will be returned to their Payrix balance (less any non-refundable fees associated with pre-arbitration disputes).
Although the official terminology for a second chargeback varies depending on the Card Brand, this dispute cycle is universally referred to as Pre-Arbitration within the Payrix Platform.
Some Card Brands (e.g. Visa) follow the Pre-Arbitration cycle process for all fraud & authorization related disputes, even if it is the first time that payment was disputed.
During this cycle, if the Merchant accepts arbitration they will work directly with the relevant Card Brand to reach a resolution. Therefore, Pre-Arbitration responses cannot be submitted in the Payrix Portal. Instead, our Support team will assist you with the relevant Card Brand specific process should the need arise for you to respond to a Pre-Arbitration dispute.
If you need assistance responding to a Pre-Arbitration dispute please contact support@payrix.com.
If a Merchant chooses to accept arbitration (i.e. submit a representment) they will be subject to additional arbitration fees that vary depending on the Card Brand. Arbitration fees can be very costly, and often exceed the amount of the original transaction.
Therefore, we suggest Merchants only pursue arbitration representment if they have extremely compelling evidence in their favor and they’ve confirmed with the Card Brand they are working with what the fees associated with the arbitration process will be.
Dispute Cycle | Merchant Actions | Possible Outcomes | Card Brands |
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Pre-Arb/Second Dispute |
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Pre-Arbitration processing flow
This diagram illustrates the process flow for pre-arbitration disputes.
Dispute Reasons
When a cardholder disputes a transaction, their issuing bank will request a detailed explanation of the problem from them. Once the issuing bank receives and validates the cardholder’s complaint, a dispute is initiated against the Merchant. There are many reasons for a cardholder to initiate a dispute which the issuing bank considers valid - and understanding each of these valid reasons will help the Merchant respond to disputes accordingly.
When a dispute is initiated it includes a reason code classifying the cardholder’s complaint. The actual reason codes vary by Card Brand, but disputes can generally be classified into four categories:
Fraud disputes
Fraud disputes occur when the cardholder claims their payment information was fraudulently used by another individual to purchase goods/services from the Merchant. Although fraud disputes are far more common in e-commerce (card not present) scenarios, they can also occur in card-present environments e.g. when EMV-chip verification is not implemented.
Customer complaint disputes
This category of dispute includes complaints by the cardholder about the goods/services they purchased from the Merchant. Common customer complaints include goods/services not received, merchandise was defective or not as described, refund not processed etc.
Authorization disputes
Authorization disputes occur when a Merchant submits a payment with an invalid or expired authorization code. For example, if a Merchant authorized their customer's card without fully completing the transaction, and then captured the payment - with a now-expired authorization code - at a later date, this may result in an authorization dispute.
Processing Error Disputes
Processing errors generally indicate a payment submission error by the Merchant resulting in the cardholder initiating a dispute. For example, this can include the Merchant submitting incorrect data or using the wrong payment method other than the one the cardholder intended for them to use etc.
Processing error dispute reason codes by Card Brand
Responding to Disputes
When a dispute is initiated against a Merchant, they have the opportunity to respond to the issuing bank by providing compelling evidence in their favor (representment). For Retrievals and (most) First Chargebacks, dispute responses can be submitted by the Merchant directly in the Payrix Portal. The Pre-Arbitration response process varies by Card Brand, and thus, they cannot be submitted in the Portal.
Visit the dispute response user guide for instruction on submitting a representment in the Portal.
How long does a Merchant have to respond to a dispute?
The timeframe allotted for a Merchant to submit a dispute response varies by a) the reason for the dispute, and b) the Card Brand. In the Payrix Portal, you will notice a Response Due Date indicating when the Merchant has to respond.

It’s important for Merchants to check the due date for each chargeback initiated against them because the timeframe can vary significantly depending on the circumstances. For some chargebacks, Merchants will have as little as seven days to respond, while for other chargebacks, they may have up to 30 days.
If the Merchant fails to respond by the due date, the dispute will automatically be considered lost and the held funds will be credited to the cardholder.
What information should a Merchant include in their Representment?
Check out our Dispute Best Practices & Tips for Merchants for detailed suggestions & examples for responding to disputes.
Although there are no definitive guidelines for what is considered “compelling evidence,” and much of this depends on the reason for the dispute, valid representment evidence falls into two categories:
Formal Evidence
This includes official documentation directly related to the transaction. Formal evidence includes, but is not limited to:
Signed credit card receipt
Completed credit card authorization form
Corresponding Invoice with cardholder contact information
Signed proof of delivery or Satisfactory Services
Informal Evidence
Informal evidence is relevant documentation that is not directly related to the transaction. This includes, but is not limited to:
Logs of correspondence between the Merchant & cardholder
Screenshots of the Merchant’s website and/or published Terms of Service
Pictures of the merchandise
A summary of the incident written by the Merchant
A Merchant’s representment should include all formal & informal evidence supporting their side of the dispute, presented clearly and concisely for the issuing bank. Providing too little evidence will likely render the representment uncompelling, but providing too much documentation may render the representment irrelevant.
For a more comprehensive guide to dispute responses please visit the Dispute Response Best Practices & Tips for Merchants.
Once a Merchant submits a dispute response they will not be able to add or modify their representment in any way. Thus, be sure your representment includes all of the compelling evidence you want the issuing bank to review.