How Disputes Work

When a cardholder disputes a transaction, a chargeback process is initiated. This guide explains the steps involved, how to respond, and best practices for managing disputes to minimize financial impact. A dispute happens when a cardholder contacts their bank to challenge a payment for a number of possible reasons. When someone files a dispute, the card networks manage the process. Each card network has a unique process for transactions.

When each card networks create a dispute, Finix will:

• Notify you of a new dispute on the Finix Dashboard
• Send you an email or webhook (if subscribed) of every new Dispute
• Provide you details of the dispute including the reason code, card network, and opportunity to challenge the dispute.

Dispute Process

While every card network varies in their process, Finix generally follows the following process for all Disputes.

Note:

• This process may differ across card networks for some specific disputes.
• Users need to subscribe to receive notifications for disputes.

You should build a process to monitor daily for any dispute updates that require additional action.

Preventing Disputes

Finix has written some best practices here on how to prevent disputes from occurring.

Chargeback

Chargebacks are a formal phase by the networks and involves first money movement. A Dispute may start as a chargeback or be escalated from an Inquiry.

When a Dispute is created and it is a chargeback, Finix will:

• Pull funds from you (if you are a direct merchant) or your merchants (if you are a platform)
• The funds are held for the duration of the dispute
• The amounts held may be the full amount or a different amount depending on the dispute details

Viewing Pulled Funds

When Finix pulls funds it creates a MERCHANT_DEBIT Transfer. This transfer will be placed into a Settlement and decrease the amount that would have been paid out to a merchant.

You can view these adjustments on the Detail page of a Dispute.

Disputes and Split Transactions For information on how disputes work for split transactions, see Split Transactions - Disputes.

Dispute Timing

The date for when disputes must be responded to is subject to change based on updates Finix receives from the card networks.

After a chargeback is created, you have a limited time to respond to the card issuer. This can range from 7-21 days, depending on the card network.

If you submit evidence, the issuer has a limited time to evaluate and decide a ruling. This can range from 60-75 days, depending on the card network.

From start to finish, the entire dispute process typically spans 2 to 3 months. The only way to shorten this timeline is by accepting the dispute through the Dashboard or API. Otherwise, there's no reliable method to speed up the process. In rare circumstances, the dispute process may take up to 6 months.

At the end of the process either:

Outcome 1: Dispute ruled in favor of the merchant

In this ruling, the cardholder's bank (Issuing Bank) reviews the evidence and decides to rule in favor of the merchant.

The following events will then occur:

• The Issuing bank returns the debited chargeback amount to Finix.
• Finix returns the amount back to the merchant

Outcome 2: Dispute ruled in favor of the buyer

In this ruling, the cardholder's bank (Issuing Bank) reviews the evidence and decides to rule in favor of the buyer. There are no extra money movements that happen if the buyer wins.

Note: At times the networks may signal, a provisional credit granted to the merchant. If the dispute is ruled in favor of the buyer, Finix will do an extra pull of funds to settle out the difference.

Inquiries

Before proceeding to a chargeback, certain card networks implement a preliminary stage. At Finix, this stage is referred to as an Inquiry. This is also commonly known as a retrieval request or request for information.

The Inquiry phase is primarily utilized by American Express and Discover; Visa and Mastercard have discontinued its use. It is important to respond to all Inquiries to prevent them from escalating into a chargeback.

Note: If you don't respond to an American Express or Discover Inquiry, it will turn into a chargeback that can't be challenged.

Dispute Fees

Finix charges a fee for the creation of Inquiries and Chargebacks. Both of these events create Dispute resources. For example, a Dispute may have 2 fees charged for the initial creation of an Inquiry and the eventual escalation to a Dispute.

Note: If you are a platform, Finix generates Costs for these events. You are able to pass these onto your merchants as Fees using our Merchant Fee Profiles.

Responding to Disputes

To learn how to respond to disputes, see our guide here.

Winning and Losing Disputes

Finix has a WON or LOST state that helps track the current progress of a Dispute. Due to the asynchronous nature of Disputes, it may take up to 2 months to be updated to WON or LOST.

These states are not final as they may be overturned by the networks or cardholder upon further escalation.

In other words:

• LOST disputes may flip to WON upon further escalation from either the cardholder, acquirer, issuer, or network. The merchant would receive their funds back if this were to occur.
• WON disputes may flip to LOST upon further escalation from either the cardholder, acquirer, issuer, or network. The merchant would have funds pulled if this were to occur.