According to Investopedia, — “A charge-back is the charge a merchant pays to a customer after the customer successfully disputes an item on his or her credit/debit card statement.”
But to a Nigerian, A charge-back is the complaint made after trying to make a payment for a service using my debit/credit card and someway/somehow i don’t get the “Transaction Successful” message on the site but my Bank sends me that debit alert we all know to well. *Cues Aramide’s “Funmi Lowo”*
Who are the Charge-back Stakeholders?
- Card Holder: This is the individual whom owns the debit/credit card used to complete the transaction.
- Issuing Bank: This is the Bank that issued the debit/credit card used in the transaction.
- Card Processors: This is the Card network in which the debit/credit card was issued on. (In Nigeria, we have three major card processors — MasterCard, VISA and Verve).
- Acquiring Bank: This is the Bank in which the merchant maintains his collection account.
- Merchant: This is the business entity in which payment is being made to.
The Charge-back Process
Ever wondered why when you make a complaint about a failed web transaction to your bank, they tell you to wait for 5 working days?
The diagram below gives an insight into the trail of a typical charge-back dispute.
Step 1: The cardholder files a complaint by contacting his or her issuing bank about the erroneous transaction.
Step 2: The issuing bank checks whether the dispute is valid. If the bank finds the request invalid, the dispute is simply declined.
Step 3: If the issuing bank sees a potential error, The bank then initiates the usual charge-back process through the card processor, to obtain credit from the merchant’s acquiring bank.
Step 4: The acquiring bank then checks whether the charge-back is valid or not, and then proceed to contacting the merchant if the charge-back is valid.
Step 5: The acquiring bank then does some research with the merchant on the validity of the charge-back claim. If the charge-back is found to be invalid, they will decline said charge-back, else they accept the charge-back and inform the card-issuing bank through the card processor.
Please note that these process has been approved and sanctioned by the Central Bank of Nigeria (CBN) and the Consumer Protection Council (CPC).
Want to know more about the rules and regulations guiding Electronic Payments in Nigeria? I recommend you read the CBN Guideline on Electronic Payments.
