Disputes
Dispute
Any cardholder-initiated challenge to a transaction, covers retrieval requests, chargebacks, pre-arbitration, and arbitration.
A dispute represents the formal process through which a cardholder challenges a transaction through their issuing bank. While often used interchangeably with the term chargeback, a dispute encompasses the entire lifecycle from the initial inquiry or retrieval request to formal arbitration between the acquirer and issuer. The process is governed by card scheme rules set by Visa and Mastercard, which categorise disputes into specific reason codes such as fraud, authorisation errors, or processing mistakes. Recent regulatory shifts and scheme updates, including Visa's Compelling Evidence 3.0 and Mastercard's First-Party Trust, have increased the evidentiary requirements for merchants attempting to defend against friendly fraud. Merchants generally have a limited timeframe, typically between 14 to 30 days, to submit a representment containing evidence such as proof of delivery or signed contracts. Failure to maintain dispute ratios below scheme thresholds, often around 1% of transaction volume, can lead to increased monitoring or higher processing fees.
Frequently asked
How do new scheme updates like Visa CE 3.0 affect the dispute process?
These updates allow merchants to combat first-party fraud by providing historical transaction data that proves a previous relationship with the customer. If a merchant can show two prior undisputed transactions that share the same IP address or device ID as the disputed one, the issuer may be required to block the dispute at the pre-chargeback stage.
What happens if a merchant exceeds the monthly dispute threshold?
Exceeding thresholds set by schemes, such as the Visa Dispute Monitoring Program (VDMP), often results in significant monthly fines and higher interchange costs. Continued non-compliance can lead to the termination of the Merchant Identification Number (MID) by the acquirer.
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