Understanding Chargebacks

A chargeback occurs when a customer asks their bank or card issuer to reverse a payment made via credit card or bank account. Chargebacks are governed by the ePayments Code administered by ASIC and apply to most Australian banks and card schemes, including Visa, Mastercard and American Express.

Chargebacks are designed to protect customers in situations such as:

• Unauthorised or fraudulent transactions

• Goods or services not received

• Goods or services not as described or defective

• Duplicate or incorrect charges

• Subscription or recurring billing disputes

While chargebacks are a normal part of accepting payments, they can result in lost revenue, additional fees and increased scrutiny if not managed correctly.

How Chargebacks Work

Step-by-step process

1. Customer disputes a transaction
   The customer contacts their bank or card issuer (e.g. CBA, NAB, ANZ, Westpac) and provides details such as:

   • Transaction date and amount

   • Merchant name

   • Reason for the dispute

   • Supporting evidence (emails, screenshots, refund attempts)

2. Bank lodges the chargeback
   The customer’s bank submits the dispute through the relevant card scheme and notifies Pay Advantage.

3. Merchant is notified
   You will be notified of the chargeback and given the opportunity to submit representations (evidence to dispute the chargeback).
   Strict deadlines apply.

4. Card scheme review
   The card issuing bank reviews the material and makes the decision.

5. Outcome

   • Chargeback upheld → Funds are returned to the customer

   • Chargeback reversed → Funds remain with or are returned to the merchant

      

Common Reasons Chargebacks Are Approved

Chargebacks are often approved when:

• The merchant does not respond within the required timeframe

• Evidence is missing, incomplete, or inconsistent

• Delivery or service fulfilment cannot be proven

• The merchant breached their own terms or refund policy

• Subscription renewals were unclear or not properly authorised

• The transaction was genuinely unauthorised or fraudulent

• Another common reason chargebacks are approved is when the cardholder name does not match the name shown on the invoice, agreement or other supporting documentation. When the person listed on the paperwork is different from the cardholder, the issuing bank may determine that there is not enough evidence to confirm the cardholder authorised the transaction.

How to Increase Your Chances of Winning a Chargeback

Respond quickly and completely

Card schemes and acquiring banks enforce strict response deadlines. Missing a deadline almost always results in an automatic loss.

Best practices:

• Monitor dispute notifications daily (email notifications are sent to all Full Access users and alerts appear in your dashboard).

• Begin preparing your response immediately.

• Submit all evidence in PDF format.

• If you cannot combine documents into one file, email all attachments to support@payadvantage.com.

Provide high-quality, relevant evidence

Your goal is to clearly demonstrate that:

• the customer authorised the transaction

• the customer received the goods or services

• the customer agreed to your terms

• you fulfilled your obligations

Examples of supporting evidence

Depending on your business type, this may include:

• Proof of delivery (tracking numbers, signatures, GPS logs)

• Proof of usage (login records, IP logs, timestamps, downloads)

• Customer communications confirming receipt or satisfaction

• Invoice or receipt matching the disputed transaction

• Order confirmation emails

• Terms and Conditions or refund policy accepted by the customer (with timestamps or checkbox logs)

• Screenshots of internal systems showing account activity

• Evidence of prior refunds or dispute resolution attempts

Match evidence to the chargeback reason

Each chargeback reason code has specific evidence requirements. Tailoring your response significantly improves your chances of success.

Examples:

• Goods not received → delivery confirmation and tracking

• Unauthorised transaction → CVV match, AVS match, 3DS authentication, IP address, device data

• Product not as described → product listings, descriptions, customer communications

• Cancelled recurring billing → cancellation dates, renewal terms, reminder notifications sent

Reducing Future Chargeback Risk

While not all chargebacks can be prevented, you can significantly reduce exposure by:

• Using 3D Secure (Payer Authentication) for higher-risk transactions

• Performing manual verification on suspicious orders (e.g. customer call-backs or ID checks)

• Keeping transaction and customer records for 12–18 months

• Providing clear post-purchase communication and accessible support

• Ensuring refund and cancellation policies are clear, visible, and followed

What is "Friendly Fraud"?

Friendly fraud occurs when a customer makes a legitimate purchase, but then disputes the charge through their bank, sometimes without valid reason. For example:

• They don’t recognise your trading name on their bank statement

• They forgot they made the payment

• They received the product or service but file a dispute anyway

• They attempt to avoid payment after delivery

While it’s frustrating, the best response is to provide clear documentation proving the transaction was authorised and completed.

Chargebacks are a standard part of accepting payments, but they don’t have to be costly or disruptive. Merchants who respond promptly, keep strong records, and provide clear customer communication are far more likely to win disputes and reduce future risk.

If you’re unsure how to respond to a chargeback or what evidence to provide, contact the Pay Advantage support team for guidance.