Dispute Cycle Overview
Disputes go through multiple stages throughout their lifecycle. Disputes may change their stage as they are closed, won, or lost. New or updated disputes on charges will typically feature an updated stage, as well.
Most disputes begin in the First Chargeback stage, which means a chargeback has been filed by the cardholder, but a dispute may instead begin in the Retrieval stage. This stage indicates a cardholder contacted their bank to request more information about a transaction. The retrieval step is not required for a cardholder to file a dispute, and occurs less often than the standard first stage of a chargeback.
If you receive a retrieval request, it is very important that you respond in a timely manner. Retrieval requests can become chargebacks if the merchant provides no documentation on the transaction.
The three main dispute flows and their stages are described below.
Retrieval Requests
A retrieval request occurs when the cardholder contacts their card-issuing bank to request more information on a transaction, but does not request a chargeback. This is typically done when a cardholder does not recognize a transaction on their statement. The issuing bank initiates a retrieval to the merchant who processed the transaction, requesting 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 Neon Pay account balance and returned to the cardholder. However, merchants should submit evidence to the retrieval request with any relevant documentation clarifying the transaction details in order to prevent a second dispute and true chargeback on the transaction. Retrieval requests also incur the same fee as chargebacks, but if a retrieval request evolves into a chargeback, a second chargeback fee is not applied.
Important Note: If a merchant fails to respond to a retrieval request, it may escalate to a chargeback. If escalated to a chargeback, the merchant will notice a new dispute on the charge in Neon Pay, The payment will be refunded to the cardholder at this time, and the standard dispute process will begin.
Although a retrieval request may become a chargeback, it is not a necessary step for the cardholder to dispute a transaction. A cardholder may skip the retrieval stage altogether and initiate a chargeback dispute on a transaction from the outset.
Retrieval Flow
First Chargeback
The first chargeback stage is the most common beginning of the dispute process, and occurs when a cardholder contacts their bank to request a chargeback on the transaction in question. When the dispute is opened in the first stage, the funds are deducted from the merchant’s account balance and temporarily returned to the cardholder. Depending upon the outcome of the dispute process, the disputed amount will be permanently returned to the cardholder or to the merchant.
When a dispute is opened in the first stage, the merchant has two options: accept the dispute to end the process and permanently return the funds to the cardholder, or respond to the dispute with evidence (called a representment) to the issuing bank, to make the case that the transaction is valid and that the funds should remain with the merchant.
If a merchant accepts a first dispute, the dispute is marked Lost and the funds are permanently returned to the cardholder. If the merchant responds with evidence, the dispute is marked Evidence Submitted and the issuing bank reviews the merchant’s representment, i.e. submitted evidence.
Note: If a merchant does not respond to a dispute before the provided reply-by date, the dispute is Lost and the funds are permanently returned to the cardholder.
After the issuing bank evaluates the merchant’s representment, the bank will either reject the provided evidence or accept it. If the bank accepts the evidence, the dispute is marked Won and the funds are returned to the merchant. If the evidence is rejected, the dispute is marked Lost, the funds are permanently returned to the cardholder.
Note: When the issuing bank rules in favor of the merchant during the first dispute stage, resulting in a Won dispute, the cardholder still has up to 45 days to present new evidence to the issuing bank that could result in a second chargeback on the same transaction. This is commonly referred to as pre-arbitration and will be explained in further detail in the Pre-Arbitration and Arbitration section.
First chargeback flow
Pre-Arbitration and Arbitration
When the issuing bank rules in favor of the merchant during the first dispute stage, resulting in a Won dispute, the cardholder still has up to 45 days to present new evidence to the issuing bank that could result in a second chargeback on the same transaction. This is commonly referred to as pre-arbitration. 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 Neon Pay balance (less any non-refundable dispute fees). If a subsequent pre-arbitration chargeback occurs, the funds will again be immediately deducted from the merchant’s Neon Pay balance and held pending the card brand’s decision.
If the merchant does not have sufficient funds in their available account balance, their linked 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 Neon Pay balance (less any non-refundable dispute fees).
Although the official terminology for a second chargeback varies depending on the card brand, this dispute cycle is universally referred to as pre-arbitration in Neon Pay.
Note: Some card brands (e.g. Visa) follow the pre-arbitration process for all fraud & authorization-related disputes, even if it is the first time the 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 or evidence cannot be submitted directly in the Neon Pay 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 a merchant chooses to accept arbitration and submit further evidence to the card brand, 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.
For this reason, we recommend merchants only pursue arbitration 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.
If you need assistance responding to a dispute headed to arbitration, please contact paysupport@neonone.com.
Pre-arbitration flow
