Chargeback Process

The following flow diagram illustrate the PayU Chargeback flow.

Step1 : Chargeback Notification

Merchant receives a chargeback alert from PayU via dashboard and email. The details include:

• Chargeback amount
• Reason code
• "Reply Before" deadline (the date by which you must act)

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Reference: For more information, refer to View a Case Details.

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Notifications from child MIDs: On the basis of configuration, the notifications from child MIDs can also be displayed.

Step 2: Merchant Response Options

You must act before the "Reply Before" date! Choose one of the following actions:

• Accept the Chargeback: For more information, refer to any of the following:
  • Manually: Accept Chargeback on Dashboard
  • API: Accept Chargeback API
• Contest/Dispute the Chargeback: For more information, refer to any of the following:
  • Manually: Contest Chargeback on Dashboard
  • API: Contest Chargeback API

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Update evidences: In order to contest the chargeback, evidences should be uploaded based the reason code.

Step 3: PayU Review & Submission

• PayU Reviews the submission with evidences and then builds the case
• PayU can return the submission because of insufficient documentation for re-submission
• PayU forwards your response (acceptance or contest with evidence) to the acquiring bank for final evaluation.

Step 4: Resolution & Status Update

• The bank reviews and makes a decision.
• PayU dashboard reflects the final outcome:
  • Closed in Customer Favour (if chargeback accepted, or evidence rejected)
  • Other statuses for dispute win or closure.

Pre-Arbitration and Arbitration

• Pre-Arbitration: After the merchant/acquirer has represented the case (submitted evidence) and the issuer still disagrees with the response. This offers a final opportunity to resolve the dispute based on new information or further clarification, potentially avoiding formal arbitration. The following happens with the case:

  • The issuer (customer’s bank) initiates pre-arbitration, usually providing new evidence or arguments as to why the chargeback should stand.

  • The acquirer (merchant’s bank through PayU) receives this and can:

    • Accept (agree with chargeback, absorbing the loss), or
    • Decline (dispute further, escalating to arbitration).

    All additional correspondence, documentation, and clarified arguments are exchanged between issuer and acquirer, often facilitated or relayed by the PayU.

• Arbitration: If pre-arbitration does not resolve the dispute—that is, the acquirer declines to accept liability. Issuer now formally intervenes and reviews the complete dispute file. The following happens with the case:

  • Both parties (issuer and acquirer) submit all documentation, correspondence, and a summary of their positions.
  • Issuer dispute resolution team evaluates according to rules and evidence.
  • Issuer issues a ruling: assigns financial liability (who bears the loss) and may impose administrative fees or penalties.
  • The decision at this stage is final and binding.

Workflow

1. Role of PayU:

   • Acts as an intermediary, collecting all merchant evidence and forwarding it to the acquirer (merchant’s settling bank, e.g., ICICI, HDFC, etc.).
   • PayU assists in interpreting chargeback codes, compliance criteria, and documentation for the acquiring bank’s submission.

2. If Pre-Arbitration Is Initiated:

   • The issuing bank, after reviewing the merchant’s representment (initial defense), may still find the defense unsatisfactory or provide new evidence.
   • The issuer sends a pre-arbitration claim to the acquirer.
   • PayU coordinates with the merchant (if more evidence is required) and the acquiring bank decides whether to accept liability or pursue further.
   • If accepted, the merchant (indirectly, through acquirer/PayU) absorbs the financial loss.
   • If declined, the process moves to arbitration.

3. During Arbitration:

   • The dispute case file—including all prior evidence, chargeback codes, written arguments, and any newly exchanged materials—is sent to MasterCard for adjudication.
   • MasterCard sets a deadline for both sides to submit any additional evidence/arguments.
   • MasterCard’s ruling is communicated back to the acquiring and issuing banks.
   • Any imposed fees (arbitration costs, penalties for losing party) are charged to the losing side’s bank, which may then debit/credit the merchant via PayU.

4. Timeline and Finality:

   • Timeframes for responses and escalation are strictly governed by MasterCard rules (often 45-60 days for each stage).
   • Once MasterCard has ruled, there is very limited scope for appeal.
   • The result is enforced through settlement systems, adjusting balances between acquirer, issuer, and, eventually, merchant.