Beyond Dates and Calendar: The Late Presentment
From financial transactions to legal matters and personal interactions, timing plays a crucial role in determining the outcome. And when it comes to presentment, i.e., a merchant presenting bills for payment, the time window matters very much. The request for payment must be done within a certain timeline, and failure to do so is known as “Late Presentment”.
This action is the negative outcome due to delayed transaction processing by the merchant and it often results in a late presentment chargeback. Every card network has its separate code and protocol for dealing with late-presentment chargebacks.
Before we deep dive into those specifics, let’s understand what exactly the term “Late Presentment” means and how it is handled by different card networks.
What is Late Presentment?
Late presentment signifies that the merchant processed the transaction post the specified time frame. In this context, it denotes that the merchant waited too long to finish processing a transaction, irrespective of whether the cardholder’s account has funds/not and whether the account is active/inactive. Late Presentment comes under the “Processing Error” dispute category.
Reasons behind the occurrence of Late Presentment chargeback:
The primary and most common reason behind the occurrence of this chargeback is “Merchant Error”. If the merchant waits too long to process a transaction, this chargeback can occur. But why would a merchant wait to process a transaction? Well, here are a few reasons:
- It can happen when the merchant agreed not to charge the card until the goods are in stock and ready to ship. Or
- It might happen because of a miscommunication between the cardholder and merchant that took time to resolve.
Also, there are a couple of other reasons as to why a late presentment chargeback can also occur like:
· Card is stolen/lost.
· Card expires.
· Cardholder’s data breach
· Cardholder exceeding their spending limit.
· Rendered unusable during the transaction.
The above-listed reasons also result in a merchant processing the transaction past the deadline. Additionally, these factors also matter in determining the status of a chargeback is late presentment or not.
· The geographical location
· The transaction type
· The card network’s time frame to process a transaction
Before moving on to why a late presentment occurs, let us understand how a transaction is processed:
- The first step in a card transaction is Authorization. In the authorization process, the merchant sends a transaction approval request to the issuer via the card network to verify that the card is in good standing and has sufficient funds to complete the transaction. If the issuer sends back a positive response, the merchant will complete the transaction.
- The second step in a card transaction is Presentment, where batching occurs. First, the merchant reviews the present-day sales and corresponding transactions and then groups the completed transactions into batches and sends them to the acquirer who then routes it to the Card network.
- The next step is Clearing and Settlement, where the card network collects the funds from its issuers and sends them to the acquirer, who then deposits the funds into the merchant account.
Why do late presentment chargebacks occur?
The card network and issuer want the merchant to present transactions as soon as they are completed. Because immediate presentment guarantees that the card account will be in good standing with adequate funds and helps ensure that cardholders can readily recognize and remember their transactions.
A cardholder may attempt to dispute a transaction if the bill doesn’t show up on their online statement for a few days or weeks after the transaction. They may think that the unusual timing of the payment is because of fraudulent activity taking place.
That’s why networks impose a maximum time limit for presentment to compel merchants to present their transactions in a fair amount of time. Furthermore, when the issuer receives a transaction outside of this time limit, they have chargeback rights, and no cardholder dispute is required.
Late presentment across different card networks:
Conclusion:
In a nutshell, Late presentment occurs when the merchant fails to submit the transactions to the issuing bank within the time frame set by the card networks. Though it occurs primarily by “merchant error”, the impact of late presentment is undeniable, which has a negative impact on the involved parties. The best and possible way to avoid the late presentment chargeback is when the involved parties adhere to the time frame and rules set by the card network.
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