Dispute Resolution

Dispute resolution refers to the structured mechanism through which a cardholder or account holder formally contests a transaction they believe to be unauthorised, incorrect, or unfulfilled. The process is governed by card scheme rules (Visa, Mastercard) and banking regulations, and typically begins when the customer contacts their financial institution to raise a claim.

Once a dispute is raised, the issuing bank provisionally credits the customer's account while it investigates. The acquiring bank (which processes payments on behalf of the merchant) is notified, and the merchant has an opportunity to submit evidence — such as delivery confirmation, signed receipts, or terms of service — to refute the claim. If the evidence is insufficient, the transaction is reversed via a chargeback.

Legitimate dispute resolution is a consumer protection tool, but it is also vulnerable to abuse. 'Friendly fraud' occurs when a customer raises a dispute for a legitimate transaction — claiming non-delivery or unauthorised use — to obtain a refund without returning the goods or having a valid grievance. Merchants bear the cost of unwarranted chargebacks including fees, and excessive dispute rates can result in account termination by card networks.