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The Possible Outcomes of the Chargeback Process for Merchants

The chargeback process is in many ways like a garden of forking paths: a series of decision points that lead to other decision points, allowing for many possible outcomes depending on the particulars of the transaction.

In the broadest terms, there are two general categories of chargeback process outcomes: 1) payment is returned to the cardholder, and 2) the merchant is allowed to keep the payment. But the specific ways in which these outcomes are reached vary significantly from one chargeback to the next. This article will present some of the most common pathways to those outcomes.

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"Actualities seem to float in a wider sea of possibilities from out of which they were chosen; and somewhere, indeterminism says, such possibilities exist, and form part of the truth."
– William James


The chargeback process begins before the actual chargeback itself. At some point after the initial transaction, some potential issue is identified and the cardholder’s issuing bank begins the process that may result in the filing of a chargeback. Often this involves a retrieval request or an inquiry, depending on the card brand. It is also when chargeback alerts are triggered. The possible outcomes include:

Merchant Receives an Alert and Issues a Refund

A merchant may receive an alert from Verifi or Ethoca that a chargeback is incoming and opt to refund the transaction before a chargeback can be filed. Once a refund is issued and communicated to the alert provider, no further action is needed.

Merchant Issues a Refund Through Rapid Dispute Resolution

Verifi’s Rapid Dispute Resolution (RDR) is an automated tool that resolves chargebacks at the pre-chargeback stage. Unlike an alert, it is an automated rather than manual response. If the pre-chargeback information fits the merchant’s parameters such that a refund should be issued, RDR does so before the process can proceed to the next stage. There may be some internal recordkeeping or additional actions needed, depending on the merchant’s procedures. But as far as actions with the banks are concerned, no further action is needed.

Merchant Receives an Alert and Resolves the Dispute by Other Means

Issuing a refund is the most common way to avert a chargeback upon receiving a prevention alert, but it is far from the only way. Perhaps the merchant contacts the cardholder to resolve the issue outside of the system of chargebacks. If the merchant resolves the issue directly with the cardholder, they should notify the alert provider. No further action is needed.

Merchant Receives an Alert and Does Not Respond

A merchant may choose not to respond to an alert. If so, the alert will almost certainly proceed to a chargeback and the money will be returned to a cardholder. If the merchant does not respond to the alert, they effectively forfeit their opportunity to dispute the eventual chargeback. Technically, the process will likely continue but no further action is possible from the merchant.

Merchant Receives an Alert and Prepares to Dispute the Chargeback

If a merchant receives an alert and determines that they want to dispute the chargeback, they should notify the alerts provider. The process will continue to the next stage but the merchant will retain the right to dispute the chargeback.


For payment disputes that progress beyond the pre-chargeback phase, there will be a point at which a chargeback is filed. This means the cardholder’s issuing bank requests that the merchant’s acquiring bank remit the payment and the acquiring bank does so. The possible chargeback outcomes at this stage include:

The Merchant Does Not Dispute the Chargeback

Sometimes a chargeback can’t be averted and shouldn’t be disputed. In these situations, the merchant is left accepting the inevitability of the chargeback. The money is returned to the cardholder and the merchant’s chargeback ratio increases. No further action is needed.

The Merchant Does Dispute the Chargeback

Other times, a merchant will not consider a chargeback to be legitimate and will determine that the best course of action is to fight it. This decision will cause the dispute process to continue to the next stage.


If a merchant chooses to dispute a chargeback, the centerpiece of that dispute is representment. Beginning with a rebuttal letter, the merchant presents their case to the issuing bank, acquiring bank, and card brand as to why the chargeback should not have been issued and why the funds should be returned to the merchant. The process of reviewing a chargeback’s reason code, compiling compelling evidence, and writing a rebuttal letter can require a lot of work on the part of the merchant so it is a significant step for the chargeback process to reach the representment stage. The possible chargeback outcomes at this stage include:

The Issuer Accepts the Representment and Returns the Funds to the Merchant

If the rebuttal letter and compelling evidence are sufficient for the issuer to conclude that the chargeback was filed erroneously, the transaction amount will be returned to the merchant via the acquirer. No further action is needed.

The Issuer Does Not Accept the Representment and the Merchant Declines to Further Dispute the Chargeback

This is the inverse of the previous outcome. The issuing bank does not find the evidence and rebuttal letter to be compelling and does not return the money. If the merchant does not elect to continue this dispute, no further action is needed.

One Party or the Other Pursues Pre-Arbitration

This outcome begins like either of the previous two, with the issuing bank either accepting or rejecting the merchant’s representment. Unlike in the previous two chargeback process outcomes, this decision is not accepted by the scorned party, who instead opts to further the process into pre-arbitration. The specifics of how pre-arbitration is initiated, which party is the initiator, and whether or not it is even available as an option varies from card brand to card brand. It is worth noting that Visa’s fraud reason codes begin as pre-arbitration cases. For circumstances in which pre-arbitration is available, this decision continues the chargeback process to the next stage.

Pre-Arbitration and Arbitration

The specifics of how pre-arbitration and arbitration play out vary significantly depending on the policies of the card brand. But, broadly categorized, the possible outcomes include:

The Dispute is Resolved in Pre-Arbitration in Favor of the Cardholder

Again, the specifics of the pre-arbitrations vary depending on the card brand. But it is possible for the issuer, acquirer, and card brand to resolve a dispute in favor of the cardholder after pre-arbitration is initiated but before the case is turned over to an arbitrator. No further action is needed.

The Dispute is Resolved in Pre-Arbitration in Favor of the Merchant

This is the inverse of the previous outcome. No further action is needed.

The Arbitrator Rules in Favor of the Cardholder or the Merchant

Arbitration is the final stage of the chargeback process. If the decisions of all of the players keep leading to the next stages, eventually an arbitrator will make a decision in favor of the merchant or cardholder. The payment will either be returned to or stay with the winning stakeholder, depending on the particulars of the process up to this point. It is worth noting that pursuing a chargeback through arbitration is an expensive process, even if the merchant ends up winning. If the chargeback is on a large transaction—$1,000 or more—it may be worth the expense to pursue arbitration, assuming the merchant believes they can win. But for smaller chargebacks, the cost of pursuing arbitration likely exceeds the cost of simply accepting the chargeback. This is the final possible outcome.


As complicated as this is, it is still far from a comprehensive explanation of every possible outcome of the chargeback process for merchants. However, it should cover the most likely possible outcomes. Ultimately, the best way for merchants to manage the outcomes of the chargeback process is to try to prevent chargebacks as much as possible before the process even begins.

Chargeback Process Flow

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