Glossary
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Glossary

A

Term Definition
Alert Affiliate fraud occurs when a scammer poses as an affiliate marketer and uses fake traffic and/or fraudulent purchases to get a higher payout. Automated bots and scripts can repeatedly click on ads while changing IP addresses.
Automated
Chargeback
Representment
Automated Chargeback Representment is a system that automatically responds to chargebacks based on rules pre-set by the merchant. This reduces the need for merchants to review and respond to simple cases but can be problematic when more complex situations must be addressed.

C

Term Definition
Card not present transaction (CNP) CNP transaction is a transaction using a payment card, when the cardholder does not present or cannot physically present the card for visual inspection by the merchant at the time the order is submitted, and the payment is made. Most often used for payments over the Internet, as well as for order transactions by mail, fax or telephone (MOTO).
Cardholder The cardholder is the person to whom the bank has issued a particular credit or debit card. For most purchases, the cardholder and the customer are the same person. However, in the case of fraud, the customer is the perpetrator of the fraud and the cardholder is the victim. In such cases, the cardholder applies for a chargeback to recover the stolen funds.
Cardholder Dispute A cardholder dispute is a process in which the cardholder declares that the debiting of his account is illegal and demands a chargeback of the payment, which can be satisfied by the issuing bank. Disputes with cardholders should only be filed in cases of genuine fraud or where the merchant has not fulfilled their end of the purchase agreement and refuses to provide a refund.
Cardholder Dispute Resolution Network (CDRN) The CDRN is Verifi’s proprietary solution, this platform is one of several alert networks that intercept chargebacks on your behalf.
Chargeback A chargeback is the process by which the issuing bank debits the merchant’s account to return it to the cardholder. Reverse charges usually occur when the cardholder claims that the charge was unauthorized or that the merchant did not provide the purchased product or service. Merchants can fight chargebacks using evidence that the reason for the dispute is false or invalid.
Chargeback Arbitration Chargeback arbitration occurs when the merchant and issuer cannot resolve a chargeback dispute. In arbitration, the card network reviews the evidence and makes a final decision on the case. The losing party is charged hundreds of dollars in arbitration fees, so escalating the case to arbitration is rarely the right choice for merchants.
Chargeback Fees Chargeback fees are the fee merchants must pay when a chargeback occurs. Chargeback fees vary widely by merchant and processor. Unlike the funds for the transaction itself, the chargeback fee is non-refundable if the merchant successfully cancels the chargeback.
Chargeback Monitoring Programs Card brands use monitoring programs both as a punishment for excessive chargebacks and as a corrective measure to help manage chargebacks more effectively.
Acquirers must carefully monitor the risk that individual merchants pose to brands. If certain risk metrics exceed predetermined thresholds, acquirers must include merchants in a monitoring program.
Chargeback Notifications (Alerts) Chargeback notifications are messages that the merchant receives informing them that a chargeback has occurred or will soon occur. Standard notifications are sent by the issuing bank when it initiates a chargeback, informing the merchant acquirer. Merchants using chargeback alerts can be notified of upcoming chargebacks before they happen, giving the merchant time to preempt them with a refund.
Chargeback Period The chargeback period is the period of time during which the cardholder can dispute the deduction of funds from their account. Each card network sets its own time limits, which may also vary depending on the reason for the chargeback. However, the most common deadline period for chargeback is 120 days from the transaction date.
Chargeback Ratio A chargeback ratio is the number of chargebacks received by the merchant divided by the number of all transactions. The chargeback ratio is usually calculated on a monthly basis. Card networks and acquirers impose penalties on merchants with high chargeback rates.
Chargeback Reason Code Chargeback reason codes are alphanumeric codes established by major card networks that indicate the reason for a chargeback. When a chargeback is submitted, the issuing bank selects a reason code from the list provided by each card network. These codes tell merchants the cause of a chargeback and what evidence is needed to support the chargeback.
Chargeback Rebuttal Letter A chargeback rebuttal letter is a cover letter accompanying the package of documents for filing a credit card chargeback. It summarizes the merchant’s reasoning as to why the bank should reverse the chargeback and the supporting documents included in the packet. Rebuttal letters should be concise and persuasive.
Chargeback Reconciliation Chargeback reconciliation, is the process of balancing the general ledgers when a chargeback occurs. In accounting, two sets of records are kept and periodically compared through reconciliations to determine errors. The often complex and lengthy series of debits and credits that accompany a chargeback dispute present unique challenges that must be overcome.
Chargeback Threshold A chargeback threshold is the upper limit of the merchant’s chargeback rate, which, if exceeded, will result in consequences for the card network, processor, or acquirer. Chargeback thresholds typically include a chargeback ratio and a total number of chargebacks to account for situations where a small merchant may exceed the ratio due to only one or two chargebacks.
Compelling Evidence Consumer Clarity is documentation that a merchant submits with a chargeback response to prove the validity of the transaction or otherwise disprove the chargeback. Every chargeback has a reason code. The reason code determines what types of compelling evidence the merchant must submit with the chargeback response.
Consumer Clarity Consumer Clarity (formerly referred to as Ethoca Eliminator) is a system that allows the merchant to provide details of the transaction to the issuing bank to prevent unlawful chargebacks. When a customer contacts the bank to dispute a charge, the customer service representative can access the data provided by the merchant to give the customer more detailed information about the transaction.

D

Term Definition
Dispute Administration Fee Mastercard’s dispute administration fee is a special fee charged in the EU each time a new step in the chargeback process begins. At the first chargeback, 15 euros are collected by the acquirer and transferred to the issuer.
Dispute Notification The bank sends us a dispute notification to determine the validity of the purchase, after buyers present a claim to their card issuing bank.
Dispute Remediation Plan A dispute remediation plan or chargeback reduction plan is a plan with specific steps the merchant will take to reduce chargebacks. These plans are often required when a merchant enters a dispute resolution program after the chargeback rate exceeds a certain threshold.
Disputed Transaction A disputed transaction is a debit or credit card transaction that the cardholder believes is illegal. They may claim that the purchase was fraudulent, that they didn’t get what they paid for, or that the amount was incorrect. If a charge is disputed, the cardholder’s bank may authorize a chargeback by taking the money from the merchant and returning it to the cardholder.
Double Refund Chargeback A double refund chargeback occurs when a customer contacts their bank to initiate a chargeback and at the same time contacts the merchant for a refund. If both the refund and the debit are fulfilled within a short period of time, a double refund may occur. In this case, the merchant will pay the cardholder twice the amount of the transaction. The merchant’s acquirer can represent, automatically or manually.

E

Term Definition
Ethoca Alerts Ethoca Alerts are notifications for specific transactions (confirmed fraud and customer disputes) that will result in a chargeback if the merchant does not act.

F

Term Definition
Fair Credit Billing Act The Fair Credit Billing Act is a law passed by the U.S. Congress in 1974 that gave credit card customers the right to challenge billing errors. This law essentially established the modern chargeback, although the details of the chargeback process are determined by the individual credit card networks.
First-Party Fraud First-Party Fraud occurs when a cardholder disputes a legitimate transaction on his or her account by knowingly or unknowingly providing false information to the bank. This type of fraud may also be referred to as “friendly fraud” or “chargeback fraud.” The term “first party fraud” is also sometimes used to describe situations in which a fraudster opens a new financial account using false identifying information. Terms used in the same sense: First-Party Misuse.
First-Party Misuse First-Party Misuse occurs when a legitimate cardholder makes a purchase but then disputes these unrecognized transactions at a later date. Other types of first-party misuse include buyer’s remorse, financial hardship, and purposeful fraud. Terms used in the same sense First-Party Fraud.
Force Majeure Chargebacks Force majeure chargebacks are chargebacks made because a force majeure clause in the sales contract released the customer from the obligation to pay the merchant. Due to the pandemic COVID-19, there were many force majeure chargebacks, especially in the tourism and hotel industry.
Fraud Fraud occurs when a customer disputes a debit from their account under false pretenses. Such illegal chargebacks may result from confusion, ignorance, or a deliberate attempt at deception. Merchants can fight chargeback fraud through the representment process of providing proof that the charges are legitimate. Chargeback scams can also be referred to as friendly scams.
Fraud Notification Fraud notification is a (cardholder’s) bank report of fraudulent activity for informing the merchant that the real cardholder did not make a payment.. Fraud notifications differ from disputes, no funds will be debited from your account, and defense documents cannot be filed.
Friendly Fraud When a consumer (or person with access to a credit card) makes a purchase and then initiates a chargeback because he or she claims not to have made the purchase and/or not to have received the goods or services.

H

Term Definition
High-Risk Merchant A high-risk merchant is a merchant that the processor or bank believes is at increased risk for chargebacks and fraud. This may be because the merchant is prone to fraudulent transactions, belongs to high-risk industry, or the merchant’s products or services have a high chargeback rate. High-risk merchants pay higher processing fees and are often unable to open merchant accounts with many providers.
Holdback A merchant reserve is the amount held by the trading account provider to cover costs associated with potential chargebacks. Trading reserves are often required for high-risk trading accounts. They often take the form of a rolling reserve, which is a percentage of each transaction held for a predetermined period of time before being released.

L

Term Definition
Liability Shift Liability for returning payments as a result of fraudulent transactions transfers from the merchant to the issuing bank when the merchant has confirmed the authenticity of the transaction using one of the 3-D Secure protocols. Without authentication by the consumer, chargebacks are the responsibility of the merchant.

M

Term Definition
Mastercard Excessive Chargeback Program The Mastercard Excessive Chargeback Program, is a system for tracking the number of Mastercard chargebacks individual merchants receive and taking corrective action against merchants receiving excessive amounts. Merchants with a chargeback rate greater than 1% may be included in the program, which imposes a fine on merchants if the problem is not corrected within three months.
Mastercom Mastercom is a system developed by Mastercard to streamline the chargeback process and enable merchants to respond to chargeback requests automatically, thereby preventing certain chargebacks.
Mastercom Collaboration Mastercom Collaboration provides near real-time visibility into disputes and informs merchants with insights into account data based on active fraud chargebacks to support their just-in-time shipping decisions.
MATCH List MATCH is the rebranded version of an older, more aptly named list, the Terminated Merchant File (TMF). The MATCH list is a list of merchants whose accounts have been closed due to excessive fraud, chargebacks, bankruptcy, or illegal activity. Traders who are on the MATCH list often have significant difficulty opening new accounts. They also usually pay higher commissions than other merchants and may have to build higher account reserves.
Merchant Account Reserve Funds Merchant account reserve funds are funds held by the payment processor to cover potential fees associated with chargebacks. Merchant reserves may take the form of a fixed amount held by the payment processor until the account is closed or a rolling reserve that holds funds from new transactions for a specified period before releasing them.
Merchant Category Code (MCC) MCC is a four-digit number that identifies the type of products or services offered by the merchant. These codes are assigned to new merchants by the major card networks. MCCs are used in various systems, including tax calculation, credit card rewards, card limits, risk calculation, and chargebacks.
Merchant Error Chargebacks Merchant error chargebacks result from a merchant error, such as failure to deliver goods or services for which the customer paid, delivery of a defective product, or duplicate processing of the same transaction. Chargebacks due to merchant error usually cannot be reversed, but they can be prevented by ensuring that customers with such issues contact support to receive a refund.

N

Term Definition
Network Mandates Network mandates are rules and guidelines established by card networks to address changes or issues in the payment industry.

O

Term Definition
Online Payment Fraud The online payment fraud exists when a fraudster uses stolen payment information to make one or more fraudulent online purchases. Common online payment frauds include credit card fraud, account hijacking, and triangulation fraud. Such fraudulent purchases almost always result in chargebacks, for which e-commerce merchants are responsible.
Order Insight (OI) A tool that allows merchants to stop Visa chargebacks before they are initiated by the customer. Merchants integrated with OI (formerly referred to as Visa Merchant Purchase Inquiry - VMPI) can provide card issuers with the detailed company, customer, order, and product information in real-time. This prevents unnecessary chargebacks and helps avoid disputes with customers.

P

Term Definition
Payment Dispute A payment dispute occurs when a cardholder contacts their bank to dispute a debit from their account. The cardholder may not recognize the charge and therefore believe it to be fraudulent, or they may have had problems with the purchase that they were unable to resolve with the merchant. If the card-issuing bank decides that the dispute meets certain requirements, it initiates a chargeback on behalf of the cardholder.
Payment Processing Error A payment processing error is an error by the merchant or its employee in processing the payment. Such errors often result in chargebacks. Examples of common payment processing errors include processing a transaction twice, processing a canceled transaction, and processing a transaction for an incorrect amount.
Post-Authorization Tools Post-authorization tools these are tools designed to prevent chargebacks after a transaction are authorized. While chargebacks prevention tools prevent fraudulent refunds, post-authorization tools also try to prevent other types of chargebacks, such as those caused by merchant error, first-party misuse.
Pre-Arbitration Pre-arbitration is part of the chargeback process, where the merchant must decide whether to accept responsibility for the chargeback or refer the case to card network arbitration. This happens after the merchant has already made a statement by providing evidence against the chargeback claim. If the dispute isn’t resolved in representment, pre-arbitration follows.
Prevention Service Prevention service is a system designed to alert merchants to potential chargebacks before they occur, allowing the merchant to prevent a chargeback by issuing a refund instead.

R

Term Definition
Rapid Dispute Resolution (RDR) RDR is a program from Visa that allows merchants to automatically process returns to resolve certain disputes. Merchants can set rules as needed to determine which disputes should be resolved this way and which need to be processed further.
Representment Representment is a procedure whereby merchants challenge a chargeback by providing evidence that the chargeback has no legal basis. The issuing bank reviews this evidence and decides whether to reverse or keep the chargeback. If the chargeback is reversed, the merchant receives the money back but must still pay the chargeback fee.
Return on investment (ROI) ROI is a ratio that shows the return on an investment in relation to its value. RROI can also be counted on individual services, such as Chargebackhit Prevent.

S

Term Definition
Supply Chain Chargebacks Supply chain chargebacks are chargebacks whose cause can be traced to the vendor’s supply chain. Supply chain problems can result in order delays, defective items, incorrect sizes, compatibility issues, and a host of other problems that can cause customers to dispute charges.
System to Avoid Fraud Effectively (SAFE) SAFE (for Mastercard, similar to Visa’s TC40) that documents cardholder fraud allegations and relevant data points. It does not prevent chargebacks or fraud but can provide merchants with additional information about fraud.

T

Term Definition
TC40 TC40 (for VISA, similar to Mastercard’s SAFE) data is information collected by the card issuing bank when the cardholder claims that a transaction on his account is fraudulent. A TC40 report is a form that a bank uses to send TC40 data to credit card payment companies such as VISA and MasterCard.

V

Term Definition
Visa Claims Resolution (VCR) VCR is an initiative launched by Visa in 2018 that made significant changes to the Visa chargeback process, including the automatic imposition of liability for certain chargebacks, changes to the chargeback reason code system, shorter response times at each step of the chargeback process, and a requirement for merchants to confirm all disputes.
Visa Compelling Evidence 3.0 Beginning in April 2023, Visa will introduce new standards for compelling evidence in fraud challenges in card-not-present environments, which they call Compelling Evidence 3.0.
The new requirements change the meaning of what Visa considers compelling evidence, including the data elements that must match previous undisputed transactions, number of prior uncontested transactions, age of previous uncontested transactions, and liability for the dispute.
Visa Dispute Monitoring Program (VDMP) The VDMP is a system created by Visa to track merchants who receive a high volume of disputes and encourage them to investigate how to resolve the issue. The chargeback rate of each merchant is tracked on a monthly basis.
Visa Fraud Monitoring Program (VFMP) The VFMP is a system created by Visa to track the number of fraud claims filed against a merchant and to provide incentives for merchants with high fraud rates to seek resolution. Merchants enrolled in the VFMP are automatically held liable in the event of fraud-related chargebacks without the ability to appeal.
Visa Response Online (VROL) VROL is Visa’s system for accepting chargeback information. Both processors and banks use this system to communicate about disputes. Visa even requires that they use this system to respond to chargeback requests, provide evidence to rebut chargebacks, and dispute initial chargeback results. Everything related to a chargeback goes through VROL.