Understanding the Dispute Process
The transaction dispute process begins when a customer raises a dispute with their issuing bank. Then, the customer and merchant submit supporting evidence supporting their claims. The bank or card network reviews the evidence, and if unresolved, it may escalate to pre-arbitration and arbitration, where NPCI or the card network provides a final decision. Here’s a step-by-step explanation of how this works:
Step 1: Dispute
If a customer thinks the payment is unauthorised or incorrect, they can file a dispute, depending on the payment method.
- UPI: Customers can file a dispute at the issuing bank or in the UPI app.
- Cards: Customers can file a dispute at the issuing bank.
Customers should provide the reason and submit proofs for the dispute, such as unauthorised payment, transaction failure, or cancellation.
Once the dispute is notified to the merchant, a chargeback is deducted from the merchant’s Zoho Payments account for card payments. However, no amount is withdrawn for UPI transactions until the dispute is lost.
Step 2: Response Submission
Once a dispute is filed, the merchant is notified and can respond in one of two ways:
- Accept: Agree with the customer’s claim and accept the dispute.
- Respond: Respond to a customer’s dispute by submitting evidence against their claim.
Note: The response has to be submitted within 14 days or it will be considered as lost, leading to a decision in favour of the customer.
Step 3: Response Review
The dispute resolution depends on the evidence submitted. The issuing bank or the card networks review the evidence and provides a resolution.
Step 4: Dispute Resolution:
Once the dispute is reviewed, there can be three outcomes:
- Dispute won: If the evidence is compelling enough, the bank or card network resolves the dispute in the merchant’s favour and reverses the chargeback in case of card payments.
- Dispute lost: The merchant’s claim is rejected and ends in the customer’s favour. The amount will not be reversed for card payments, and the chargeback will be withdrawn for UPI payments.
- Dispute escalated: The bank can also escalate disputes to pre-arbitration due to insufficient evidence or a lack of clarity regarding the transaction.
Step 5: Pre-Arbitration
In this phase, the merchant is given the opportunity to submit additional evidence in response within 6 days. The issuing bank or the card network then reviews them and determines the outcome. Same as in the previous phase, the dispute can end in favour of either the customer or the merchant.
If the bank requires further clarity or evidence, the dispute will proceed to a formal arbitration.
Note: If the dispute is lost during pre-arbitration, the disputed amount will be withdrawn from the merchant’s account for UPI payments, while for card payments, the chargeback will not be reversed.
Step 6: Arbitration
During this phase, any additional evidence will be submitted. For UPI payments, NPCI reviews the claim, while the card network reviews card payments. This process can incur additional fees and penalties imposed by NPCI or card network for escalating the dispute, which the losing party must cover. There can be only two outcomes:
- Arbitration won: The merchant wins, the chargeback is reversed, and the amount is credited to the merchant’s account.
- Arbitration lost: The customer wins, the disputed amount along with the penalty is deducted from the merchant’s account for UPI payments, and the chargeback is processed as a refund for card payments.
