What is the difference between retrieval requests vs chargebacks in payment processing?

The payment processing industry can be complex, with many different circumstances and types of transactions. While most are very distinct, some can appear to be very similar on the surface, making them difficult for businesses to understand. For example, chargebacks and retrieval requests are both types of payment dispute, but they serve different purposes and have their own sets of rules and procedures. 

In this guide, we’ll explain what a chargeback is, how it compares to a retrieval request, why a customer might dispute a payment, and how to minimise the risk of chargeback fraud. This knowledge will help your business to handle payment disputes efficiently and make more informed decisions. First of all, let’s look at what ‘disputed payment’ means. 

What is a disputed payment? 

A payment dispute is when a cardholder questions the validity of a transaction, leading to an investigation and potential reversal of the charge. This can be due to various reasons, such as suspected fraud, dissatisfaction with a purchase, or errors in processing the transaction. When a cardholder initiates a payment dispute, this prompts their bank to investigate the claim. 

During this investigation, the merchant is typically required to provide evidence to support the legitimacy of the transaction. If the evidence is insufficient or the dispute is resolved in the cardholder’s favour, the transaction amount may be reversed through a chargeback. Understanding the different disputed payment meanings is crucial for businesses, as it involves several steps that can impact financial health and customer relationships. 

What is a retrieval request? 

A retrieval request is a check initiated by cardholders or issuing banks to obtain more information about a specific transaction. This could happen if the cardholder doesn’t recognise a transaction and contacts the issuing bank for more information. While this could be a sign of fraudulent activity on the account, it could also be a legitimate transaction that the cardholder has forgotten about. 

A retrieval request isn’t in itself a payment dispute, but is instead a step towards clarifying transaction details. However, it could escalate into a chargeback depending on the outcome of the check. Timely and accurate responses to retrieval requests are therefore vital to minimise this risk. Ensuring that transaction records are detailed and readily available can help businesses to provide the requested information promptly. 

What is a chargeback? 

A chargeback occurs when the cardholder disputes a payment, leading to a reversal of funds. They are more serious than retrieval requests, as they involve returning the transaction amount, which can affect cash flow. Legitimate reasons for chargebacks include customer dissatisfaction or merchant error. However, there is also the possibility of chargeback fraud, when a cardholder intentionally disputes a legitimate transaction to obtain a refund while retaining the purchased goods or services. 

If they occur frequently, chargebacks are bad for businesses. They have significant financial implications, such as loss of revenue and increased processing fees, as well as the possibility of causing reputational damage with payment processors and customers. 

Retrieval request vs chargeback: Key differences 

Here’s a quick overview of the key differences of retrieval requests vs chargebacks at a glance. 

Best practices for handling retrieval requests and minimising chargebacks 

Proactive measures are essential to prevent a payment dispute from escalating into a chargeback. Here are some best practices that your organisation should follow to ensure effective dispute management and minimise the risk of chargeback fraud. 

1. Maintain detailed transaction records 

Keeping comprehensive records of all transactions will help you to respond to retrieval requests quickly and accurately. If you’re unable to supply the required information promptly, this could result in a chargeback on a legitimate transaction, which could prove costly for your business. 

2. Provide clear information 

Ensure that the information you provide during a retrieval request is precise and complete. Discrepancies could contribute to the transaction being classed as a disputed payment, meaning your business may end up refunding money unnecessarily. 

3. Adopt chargeback fraud prevention measures 

While chargebacks are often legitimate, fraudsters may use this process to initiate a refund without returning the purchased goods. Chargeback fraud detection tools can minimise the risk of this occurring by analysing transaction data, identifying suspicious patterns, and implementing robust security measures. 

4. Optimise customer service 

Great customer service can help to minimise chargebacks by ensuring that people understand what they’re buying before making the transaction, as well as offering aftercare support to maintain customer satisfaction. Anticipating issues and providing prompt solutions can help to set clear expectations and prevent dissatisfaction from escalating to a chargeback. 

5. Improve dispute resolution processes 

Payment service providers (PSPs) have extensive experience and specialised knowledge in handling chargebacks and payment disputes. By collaborating with your PSP, you can better understand the nuances of retrieval requests vs chargebacks, as well as how to effectively manage different types of disputes. 

The role of payment service providers (PSPs) in payment disputes 

Payment Service Providers (PSPs) play a crucial role in managing retrieval requests and chargebacks. They act as intermediaries, ensuring smooth communication between merchants and cardholder banks. 

For retrieval requests, PSPs work to obtain more information about a specific transaction. This is often the first step in the chargeback process, but may not always be escalated. Here’s an overview of the PSP’s role in this type of payment dispute:  

1. Receive a retrieval request from the cardholder’s bank. 
2. Promptly forward the request to the merchant. 
3. Check that the merchant’s response is accurate, complete, and submitted within the required timeframe to avoid chargebacks. 
4. Provide merchants with tools and resources to streamline the retrieval request process. 

For chargebacks, PSPs facilitate communication between the merchant, the cardholder’s bank, and the card network (such as Visa or Mastercard). Here’s an overview of the PSP’s role in this type of payment dispute: 

1. Receive a chargeback notification from the cardholder’s bank. 
2. Promptly notify the merchant about the dispute. 
3. Assist merchants in understanding the reason for the chargeback, and provide guidance on how to respond effectively. 
4. Provide merchants with management tools and services to effectively track and respond to chargebacks. 
5. Help merchants to gather evidence to dispute invalid chargebacks. 

While the role of PSPs is consistent when a customer disputes a payment, the exact processes may vary based on card network rules and the nature of the dispute. Staying updated with industry standards helps PSPs to support merchants effectively. However, it’s also important for businesses to keep on top of current legislation regarding chargebacks and retrieval requests to ensure that they understand how they’re processed, and the outcomes they can have. 

Minimising chargeback fraud and payment disputes for your business 

Understanding and distinguishing retrieval requests vs chargebacks is essential for protecting your business from potential financial losses. Implementing the proactive measures and best practices we’ve looked at in this article can enhance your payment processing operations and mitigate the risk of chargeback fraud. 

Having the right tools in place will help your business to accurately and efficiently respond to retrieval requests in a timely manner, as well as helping to check the legitimacy of any payment disputes. 

For tailored solutions and assistance to support your organisation’s chargeback and fraud prevention processes, contact Access PaySuite. Our expert team will be happy to advise you on the right solutions for your business.