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Chargeback guide for Yoco merchants

What are chargebacks? How do they affect your business? Here's everything you need to know.

What are chargebacks?

A chargeback, otherwise known as a payment dispute, is a claim that gets created when a customer asks their bank/card issuer to reverse a charge.

Chargebacks are an effective tool for cardholders to dispute any transaction that they are unhappy with.

The problem for merchants, however, is when fraudulent cardholders attempt to dispute legitimate transactions in order to get you to return funds to them.

There are many reasons why a legitimate chargeback can occur, the most common being:

  • The cardholder does not recognise the transaction

  • Duplication of a transaction/payment

  • Processing error

  • Goods or services not delivered 

  • Defective goods 

  • Refund not processed

  • Fraudulent use of the card

How to protect your business against illegitimate chargebacks

Here is a crazy stat: according to Vesta, in 2021 global chargebacks amounted to $20 billion as a result of e-commerce fraud.

Luckily, we've got some tips and tricks to help you stay safe:

  • Ensure that you have invoices or any record of purchase from any cardholders

  • Ensure that if you are delivering an item, you have proof of delivery (preferably signed)

  • If you are performing a service, ensure that you have a signed acknowledgment that the work has been performed or the service has been completed

  • Save any communication with the cardholder in the event a chargeback may occur (it’s also good business practice)

What's Yoco's chargeback process?

Here's how it works:

  1. When a chargeback is raised by a cardholder, Yoco’s acquiring bank (the bank that receives all of Yoco’s merchant payments) will inform us of these chargebacks and the reason.

  2. We'll then contact you via email with the details of the claim, and request info related to the chargeback claim.

  3. You have 3 working days to provide us with the required documentation to resolve the chargeback claim.

  4. We then submit the supporting documentation to our acquiring bank. 

  5. If the bank decides that the information you have provided is adequate, the chargeback can be won in your favour. However, if the information provided is not adequate, or you don't provide what was requested, we'll have to accept the chargeback. 

  6. If the chargeback is accepted, you will be liable for the value of the chargeback claim.

We hope that this guide on chargebacks will better equip you and your business in dealing with chargebacks!

For guidance on any fraud-related matter, head on over to our fraud guide.

If you have any questions, please don't hesitate to contact our chargebacks team at [email protected]

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Still have questions about chargebacks for Yoco merchants? We might have the answers here.

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What is a Dispute / Chargeback?

A chargeback, otherwise known as a forced payment dispute, is a claim that gets created when a customer (i.e. cardholder) asks their bank/card issuer to reverse a charge on their card. Chargebacks are the primary tool used to resolve card payment disputes.

What are the reasons for a cardholder lodging a dispute?

There can be multiple reasons a cardholder can lodge a dispute. The most common are: 1) the cardholder does not recognise the transaction, 2) duplication of a transaction or payment, 3) a processing error, 4) goods/services not delivered, 5) defective goods, 6) a refund not processed, 7 fraudulent use of the card.

Why are chargebacks important?

Chargebacks are a consumer protection mechanism that allows consumers to get their money back for fraudulent charges, non-delivery, duplication, etc. Chargebacks are also important for merchants to keep detailed transaction records showing that each cardholder has received the goods or services they’ve paid for. This may include signed receipts and any other relevant information.

How can I get a chargeback when the transaction has an approval code?

The authorization approval code simply verifies that the card is in good standing, has not been reported as lost or stolen, and has sufficient funds available. An approved transaction does not guarantee that you will not receive a chargeback.

Can I resolve a chargeback?

Yes. Yoco will inform you of the chargeback and request the information required in order to resolve it. The info needed depends on the nature and reason code of a chargeback. We typically require an invoice, signed proof of delivery, proof of refund, or any other supporting documentation / info that provide compelling evidence between merchant and cardholder.

When will a chargeback be accepted?

Yoco will inform the acquiring bank (who the chargeback was reported to) that the chargeback can be accepted if the following occurs: – the merchant accepts the chargeback – no information/response is received from the merchant within the given time period – the information provided by the merchant is inadequate or not compelling enough to fight the chargeback

How long does it take to resolve a chargeback?

When Yoco contacts you regarding a chargeback, the requested info and documents must be provided within 3 working days. The actual resolution date of a chargeback can take between 30–90 days.

Can any transaction become a chargeback?

Yes, provided it is an approved transaction and is within the specified timeframe.

How long do cardholders have to log a chargeback?

The timeframe differs depending on the reason for the dispute. For example, if the dispute is for goods not delivered, then a customer can lodge a dispute for up to 540 days. If it's for a duplication it must be done within 30-120 days.

What happens if a dispute becomes a chargeback (meaning the chargeback is accepted)?

If the chargeback is accepted, you will be liable for the total value of the chargeback claim and the associated fees.

What/Who are issuing banks?

The issuing bank is the bank that issued the card used to make a payment. The issuing bank represents the interests of the cardholder.

Can my Yoco account be terminated for receiving a chargeback?

Yes. Chargebacks could result in the termination of your Yoco account. This is in line with section 8.1.4 of the merchant agreement, which forms part of Yoco’s terms and conditions at sign-up. More info on this is laid out in the Yoco Merchant Agreement.