What is a chargeback?
A chargeback occurs when a cardholder (consumer) contacts their issuing bank (the bank that issued their credit/debit card) to dispute a payment. Instead of reaching out to the merchant, the cardholder asks their issuing bank to reverse the charge. This triggers a formal process governed by the card network rules (Visa, Mastercard, UnionPay, etc.).
Common reasons include:
Fraud or unauthorised use
Product/service not delivered
Product not as described
Duplicate or incorrect charges
Note some alternative payment methods also support chargebacks. In that case the consumer contacts the provider of the alternative payment method, who will trigger the process to reach out to the merchant either directly or via their processor. As chargebacks via alternative payment methods are more rare the below description is focused on cards.
Chargeback and dispute lifecycle
Initial chargeback
The cardholder contacts their issuing bank to challenge a transaction i.e.
The issuer temporarily credits the cardholder.
The issuer pulls information about the original payment (amount, merchant, date).
The issuer sends a formal dispute claim through the card scheme (Visa/Mastercard/etc.) i.e.
A chargeback reason code is assigned.
Evidence from the cardholder is submitted (if provided).
Nomupay receives the chargeback from the card scheme and:
Debits the merchant’s account for the disputed amount.
Applies the standard chargeback fee.
Passes the information to the merchant.
This is where you, as the merchant, first become aware of the chargeback.
The merchant reviews the chargeback and makes a responds. At this point you have two options:
1) Accept the chargeback:
You agree the chargeback is valid (e.g., fraud or customer dissatisfaction) i.e.
Funds remain with the cardholder.
The dispute closes.
2) Challenge the chargeback (which will trigger the Representment phase):
You believe the chargeback is invalid and provide evidence such as:
Delivery confirmation
Refund policy
Proof of customer usage
Signed receipts or authorisation logs
The acquirer bundles the evidence and submits it back through the card scheme to the issuer.
Representment
The acquirer shares the evidence with the card scheme, who forwards to the issuer.
Consequently the issuer reviews the merchant evidence i.e. the issuer evaluates:
The merchant’s compelling evidence
Cardholder’s claim
Network rules and reason codes
The issuer then decides to:
1) Rule in merchant’s favour
Funds are returned to the merchant.
Dispute is closed.
2) Rule in cardholder’s favour
Funds remain with the cardholder.
Merchant permanently loses the transaction amount, or can choose to challenge the decision.
The issuer shares the decision and submits it back through the card scheme to the acquirer, who informs the merchant.
Pre-arbitration and Arbitration (less frequent)
If the merchant continues to disagree, the dispute can escalate via the card network for pre-arbitration and arbitration. Note card schemes charge high fees if a chargeback reaches arbitration, so this is used rarely and only for strong cases.
Nomupay's role in the lifecycle
The acquirer acts as the merchant’s representative throughout the lifecycle:
Receives the chargeback from the card scheme
Debits the merchant account while the case is reviewed
Communicates the chargeback to the merchant
Collects and formats evidence from the merchant
Sends representment, pre-arbitration and arbitration back through the card scheme
Handles escalation if arbitration is needed
Ensures compliance with card scheme rules and deadlines
The acquirer does not make the final decision - the issuer does - but the acquirer ensures your response is valid and compliant.