This step ensures that the payment details are valid and that the required funds are available. Depending on the payment method, charge intent can either be captured immediately or held for a specified period before finalizing the transaction.
Key Aspects of Charge Intent:
Authorization Hold: A temporary hold placed on the customer’s funds to confirm availability.
Capture Window: The period within which the charge must be finalized. If not captured, the hold is released.
Fraud Prevention: Helps mitigate fraud by verifying the transaction before processing.
Customer Notification: Ensures transparency by notifying the customer of pending charges.
Refunds
A refund occurs when a merchant returns funds to a customer’s payment method due to a canceled order, a dispute resolution, or another valid reason. Refund policies should be clear and fair to maintain customer trust and reduce disputes.
Steps to Process a Refund:
Initiate Refund: The merchant submits a refund request through the payment system.
Verification: The system checks transaction eligibility and ensures funds are available.
Processing Time: Refunds typically take 5-10 business days, depending on the payment method.
Customer Notification: The customer is informed once the refund is processed.
Chargebacks
A chargeback is a payment reversal initiated by the cardholder’s bank due to disputes such as unauthorized transactions, fraud, or dissatisfaction with a product or service. Unlike refunds, chargebacks involve banks and card networks and can have financial implications for the merchant.
Calculating the Cost of Chargebacks
Chargebacks not only result in lost revenue but can also incur fees and penalties. Here’s a breakdown of the costs:
Lost Sales Revenue: The total value of the transaction is forfeited.
Chargeback Fees: Banks and payment processors charge fees, typically ranging from $15-$50 per dispute.
Operational Costs: Time and resources spent responding to disputes.
Reputational Damage: Excessive chargebacks can damage a merchant’s credibility and increase transaction fees.
Timeline of a Chargeback
Customer Files Dispute (Day 1-7): The cardholder contacts their issuing bank to dispute a charge.
Issuing Bank Reviews Dispute (Day 7-14): The bank investigates and determines if the claim is valid.
Merchant Responds (Day 14-30): The merchant can provide evidence to counter the dispute.
Bank Decision (Day 30-60): The issuing bank decides whether to reverse or uphold the charge.
Final Resolution (Up to 120 Days): If unresolved, the case may proceed to arbitration through the card network.
Preventing Chargebacks
Clear Communication: Provide detailed product descriptions, return policies, and customer support.
Fraud Detection: Use security measures like CVV verification, address verification (AVS), and fraud monitoring.
Timely Fulfillment: Ensure accurate and prompt order delivery.
Dispute Management: Respond to inquiries quickly and maintain transaction records.