A dispute happens when a cardholder calls the bank or card issuer to report an unrecognized or suspicious transaction, and requests a cancellation or refund. The following table shows different types of disputes.
|Merchant error||When a seller charges a different price for the product/service or charges twice for the same product/service by mistake. It's also when the seller doesn't confirm a refund.|
|Identity fraud||When a dispute is the result of a stolen identity, stolen data, or a lost or stolen card. Also known as true fraud .|
|Chargeback fraud||When the cardholder requests a refund because they’re unsatisfied with purchased goods or services by calling the bank or the network responsible for the transaction, instead of contacting the original seller. Also known as friendly fraud .|
|Dispute||The process betweeen an acquirer, an issuer, and the card network that takes place when the cardholder or the isssuer initiates a chargeback.|
|First presentment||The purchase or transaction itself.|
|Chargeback||When a transaction is contested for reasons of fraud, disagreement, processing error, or authorization.|
|Second presentment or representment||When the acquirer does not agree with the chargeback and its reason and wants to provide evidence that the transaction (the first presentment) is still valid.|
|Pre-arbitration||The step before arbitration that happens when the issuer and cardholder do not agree with the second presentment and want to proceed with the dispute.|
|Arbitration||When the card network has been asked to mediate a dispute. The card networks charge a hefty fee for this, so, in many cases, the transaction is not significant or expensive enough to make this worthwhile for the issuer to contest.|
|VISA Allocation||Allocation is a process for Visa disputes that attempts to weed out some illegitimate chargebacks and shorten the time affected disputes take to resolve. Visa uses internal data and processes to automatically block disputes that don't meet Visa's requirements for validity.|
|VISA Collaboration||Collaboration is the new name for Visa's old chargeback process, where each party has several chances to investigate and submit evidence in order to determine whether a chargeback is legitimate|
When a cardholder has a dispute, they're asking for a chargeback to their card. The following shows how a chargeback returns to the cardholder, if they win the dispute.
❶ The cardholder disputes a purchase and notifies the card issuer.
❷ The card issuer reviews the dispute and sends it to the card network.
❸ The card network reviews the dispute and sends it to the card acquirer.
❹ The card acquirer reviews the dispute and notifies the merchant.
❺ The bank reviews the dispute.
❻ The card acquirer forwards the dispute to the card network.
❼ The card network resubmits the dispute to the issuer.
❽ After reviewing the dispute, the issuer decides which side wins. If no sides agree, then they go through arbitration.
❾ If the cardholder wins the dispute, then they get a chargeback.
How Pismo handles disputes
Pismo handles disputes in the following order:
- The cardholder disputes a transaction with the card issuer.
- The issuer makes dispute API calls to the Pismo platform.
- Pismo opens dispute with the card network.
- Once there's a response from the network, Pismo informs the issuer and cardholder about the dispute status. To see how to get the status on a dispute, go to Get possible dispute states.
- If the issuer loses the dispute, they can either accept the loss or file a case with the card network.
Pismo's dispute API
You can use the Pismo platform to provide the context and reasons for a dispute. Pismo endpoints allow you to do the following after you Create a dispute
- Create a dispute form - Create a dispute form to be sent to the network
- Create a fraud report - Create a fraud report for cases of fraud
- Upload an evidence file - Upload a supporting evidence file
- Create a dispute installment - Dispute an installment for a transaction composed of multiple installments.
Using Pismo API endpoints to resolve a dispute
Before you begin, make sure you are set up with disputes access.
Disputes state machine
Pismo provides a state machine as a framework to help guide clients through the dispute process.
You can use the Pismo API to resolve disputes via the following steps:
Identify the reason for the cardholder’s dispute request and its corresponding reason code using your card network's chargeback guide. Each card network, such as Visa or Mastercard, defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands. Here's a reason code quick reference for the most common network brands. See also, the VISA or Mastercard chargeback guides.
Examine the evidence your customer sent, and see if their dispute is valid according to the chargeback guide. If you have a chargeback or risk policy for opening disputes, verify the dispute request adheres to it.
If the dispute appears valid, use the reason code to create a dispute
Open the dispute within the card network as soon as possible, attaching the files that support your plea. To open the dispute on the card network, use the Update dispute status endpoint and change the status of your dispute to
Dispute status change notification
You are notified when there's a dispute status change if you have signed up to receive event notifications, either in real-time or via files. The status event is called dispute_installment_status_change-1. This event occurs if the Update dispute status endpoint is called or if the status changes through other means like network processing.
If you submit files with unsupported formats or disregard any card network rule, the card network will reject the dispute. Pismo then notifies you with a
FAILED_ON_CREATIONstatus event. If this occurs, update the dispute to correct the data and resend your case by updating the dispute status to
If an acquirer’s response doesn’t end the dispute, check if it’s compliant with the card network's rules.
Assess the time, operational cost, and disputed amount to determine if going through pre-arbitration or arbitration is appropriate. If not, call Update dispute status to change the dispute status to
ISSUER_LOSSand close the dispute.
If the acquirer accepts the dispute and its corresponding chargebacks, then you won the dispute. When Pismo notices the status change at the card network, it changes the dispute status to
Pismo can migrate an already created Mastercard or VISA dispute to the Pismo platform with a case number (VISA) or a claim ID (Mastercard) and allow a customer to continue the chargeback process.
Dispute migration endpoints
A dispute fee is a way for an acquirer and issuer to exchange money outside the normal chargeback process. Typically, this means reversing a settled chargeback, but not always.
Note: Currently, Pismo only works with Mastercard on processing dispute fees.
Dispute fee scenarios
Issuer realizes chargeback is invalid
An issuer creates a chargeback which the acquirer accepts and pays. Later, the issuer notices that the chargeback is invalid because, for example, the cardholder recognizes the transaction now or because the cardholder reached an agreement with the merchant. At this point, the issuer must give back the disputed amount. This can be done through Pismo's dispute fee process.
Acquirer realizes chargeback is invalid
An acquirer realizes a chargeback was invalid and initiates the dispute fee process with the issuer through Pismo.
Deadline for chargeback missed
An issuer misses the deadline for opening a chargeback. However, the cardholder is still complaining about the transaction. Through email, phone, or other means, the issuer contacts the acquirer and they agree that the acquirer should send a credit for the issuer even though there is no chargeback. In this case, the dispute fee process can take place without a chargeback having occurred.
Dispute fee terms
- Fee collection - How Mastercard refers to the dispute fee.
- Sender - The party sending the amount (credit or debit).
- Receiver - The party receiving the amount (credit or debit).
- TQR4 - The TQR4 file is generated as a result of Mastercard generating dispute items on behalf of the customer, as requested by the customer. Pismo receives this report, also known as a reconciliation report, and sends it to you, usually within two days after a dispute fee is created.
Dispute fee process
- A dispute fee is created and sent to Mastercard.
- Mastercard processes the dispute fee and resolves or rejects it. Resolution includes crediting or debiting the sender and receiver accounts.
- Mastercard sends a TQR4/TQR6 reconciliation report to Pismo who then sends it to the parties involved. Details about what's included in these reports can be found in the Mastercom User Giuide on page 166.
Automated dispute installment control
If an issuer opens a dispute for a transaction that has more than one installment, with installments that can still be posted, the issuer will need to open a dispute for subsequent installments as well. With automated dispute installment control, once you open a chargeback for the first installment, the same information can be used for subsequent transaction installments. You, as an issuer, only have to open a dispute for the first installment. The option for this is configured at the program level, see your Pismo representative if you would like to have this feature implemented for your program.
To stop automated dispute installment control for a specific dispute, call the Update dispute endpoint and set the
stop_automated_installment flag to
Dispute fee API endpoints
- Create dispute fee - Open a dispute fee with Mastercard. This generates a dispute_fee_events-1 event.
- Get dispute fee - The get and list endpoints return all the same information you can find in the TQR4 report plus the
messagefield that describes the reason for creating the dispute fee.
- List dispute fees
- Update dispute fee
Updated 1 day ago