Chargeback

How it works

Chargebacks are the process of disputing a transaction with a bank. When a cardholder notices unfamiliar transactions in their payment history, they can open a chargeback to get their money back. For example, chargeback can be opened because of a payment for a service that the cardholder doesn’t use, or if a cardholder made a purchase in a game and hasn’t received what they paid for.

A chargeback does not always mean that the player was scammed. Sometimes errors may occur accidentally, e.g., when an incorrect amount was entered while paying or the same invoice was issued twice. However, sometimes bank card data is stolen for fraud purposes.

The following banks are involved in the process of disputing the chargeback:

• An acquiring bank is the bank that processes the acceptance of bank cards and payments on behalf of a merchant.
• An issuing bank is a bank that issues and processes bank cards.

Xsolla as a merchant of record receives all chargeback notifications and saves them in your project in Publisher Account for you to always have up-to-date data. You can find this information in the Support > Disputes section.

The following information is available in this section:

1. Saved money — the amount, including commissions and payments, that you saved due to Xsolla chargeback management processes.
2. Dispute win rate — the ratio of the number of chargebacks won to the amount of chargebacks won and lost. This indicator shows which part of the disputed transactions Xsolla won.
3. Disputing transactions — the number of applications received and processed for chargeback.
4. Disputing transactions amount — the total amount of disputed transactions.
5. Won cases — the number of requests for chargeback with the Won status when the issuing bank sided with a merchant.
6. Won cases amount — the total value of chargeback transactions in the Won status.

To get a report on all disputed transactions, click Download report (CSV).

Chargeback flow

1. A cardholder contacts the bank and submits an application for a chargeback.
2. A bank processes the application and sends it to the merchant for review via the acquiring bank.
3. The merchant can immediately approve the application and make a refund or dispute the application by providing the necessary evidence.

Chargeback stages

A chargeback can consist of several stages. These stages are displayed in the Dispute type column in Publisher Account in the Support > Disputes section:

1. Inquiry — a cardholder requests details of a suspicious payment from their bank. This is an optional stage since a cardholder can open the chargeback immediately at the 1st-time chargeback stage.
2. 1st-time chargeback — primary chargeback. It is the process of disputing the transaction directly with the issuing bank. The reasons for this may be non-fulfillment of contract obligations by the merchant on the quality of the goods or services provided, incorrect write-off of funds, or other factors.
3. 2nd-time chargeback (Pre-Arbitration) — repeated chargeback. This is the process of disputing the transaction when a cardholder does not receive a satisfactory response to the initial chargeback from the issuing bank.
4. Arbitration — the process of resolving a dispute between the issuing bank and the merchant in cases where the initial and repeated chargeback were rejected.

Example:

1. A player contacts the bank for clarification on the payment.
2. The merchant receives an Inquiry notification and provides the bank with all the necessary information to confirm the legitimacy of the transaction, transfer of the goods to the player, etc.
3. If the player does not agree and insists on a refund, a chargeback is created for this payment at the 1st-time chargeback stage. In this case, the seller needs to prepare evidence and send it to the bank.
4. After that, there may be 2nd-time chargeback (Pre-Arbitration), and then Arbitration.

Commission calculation

A commission is charged as an additional cost of processing the chargeback and in most cases is debited even in winning cases. These fees consist of fees from payment systems and acquiring banks. The amount of commission may vary depending on the payment region, the stage, and the result of disputing the chargeback.

Payment dispute time frame

A cardholder usually has 120 days to dispute the payment.

After receiving the chargeback application, the acquiring bank and the merchant must respond within a certain time frame depending on the chargeback stage:

• Inquiry — 30-45 days depending on the payment system, including 15-30 days for processing on the merchant’s side.
• 1st-time chargeback — 20-45 days, including 8-12 days for processing on the merchant’s side.
• 2nd-time chargeback (Pre-Arbitration) — 30 days, including 8-12 days for processing on the merchant’s side.
• Arbitration — 10-45 days, including 8-12 days for processing on the merchant’s side.

It usually takes 30-60 days to receive a decision from the payment system.

Payment dispute process

The status of a chargeback can change during the dispute process. These statuses are displayed in the Dispute result column in Publisher Account in the Support > Disputes section.

• New — application for chargeback has been received. This status is displayed until the chargeback management team processes it.
• Accepted — a final status that indicates that a decision has been made to refund the payment to the cardholder.
• In progress — the evidence has been collected and sent to the acquiring bank. This status is displayed until the end of the checking procedure.
• Won — a final status that means that the issuing bank sided with the merchant.
• Lost — a final status that means that the issuing bank sided with the cardholder. In this case, the payment must be refunded.

Chargeback reasons

Chargeback reasons are displayed in the Dispute reason column in the Support > Disputes section. In the table below, chargeback reasons are grouped by category.

Authorization issue

Consumer disputes

Fraud

Processing error

FAQs

Why can’t all chargebacks be disputed?

Even though it is possible to dispute any chargeback, transactions made by real scammers are usually not disputed, and the money is returned to the victim.

There are two types of fraud:

• Friendly fraud — situations where the purchase was made by family members or acquaintances of the cardholder without the cardholder’s permission.
• True fraud — situations where the cardholder has become a victim of theft of personal data or cards.

To challenge friendly fraud payments, you must provide proof of a regular payment history, subscription renewal, and passing all payment checks like 3-D Secure or Address Verification Services (AVS). Confirmation of the purchase in the game is not sufficient proof of fraud, since the issuing bank mainly needs information about the payment activity of the cardholder.

In the case of a real fraud, Xsolla makes a refund and takes the side of the victim. This demonstrates the company’s loyalty and trust in their customers, and also maintains a good working relationship with the issuing bank.

If there are other reasons for the chargeback, e.g., when the player did not receive the goods or what they paid for, Xsolla disputes each chargeback whenever possible.

Why is the chargeback won, but the transaction is canceled?

This happens when Xsolla receives applications for chargeback on an already refunded transaction. For instance, such a transaction could have been refunded as a preventive measure against fraud or at the request of the cardholder, but the chargeback was already being processed at the bank. Xsolla processes each chargeback to prevent double debiting of the payment amount: the first debiting at the time of the refund, and the second one as a chargeback.

Why aren't all chargebacks displayed in Publisher Account?

You can find the details of chargebacks that are processed by Xsolla in your Publisher Account.

Not all payment systems allow processing chargebacks:

• Some acquiring banks resolve all disputes on their side and send refund notifications at the end of the chargeback processing cycle. Depending on the bank, this cycle can take from 1 day to 2-3 months.
• Some acquiring banks do not allow disputing chargebacks. In such cases, the chargeback is automatically assigned the Accepted status.

In what cases does Xsolla need a game developer's participation?

Internal data, such as payment history from a game account, the results of the 3-D Secure check, the list of recurring subscription charges, etc., are sufficient for Xsolla to make a decision on most chargebacks. Managers that work with chargebacks contact a game developer only when additional information is needed about the behavior of the player in the game.

Examples:

• If a player claims that they have already contacted the game support service, but their problem has not been resolved.
• Several applications have been received from different players who dispute the entire payment history with the same description of the problem, e.g., game conditions changes, a game shut down, etc.

Last updated: September 3, 2024