Late Presentment- The Original Scoop
Go to the principal’s room, you’re late
Don’t be late next time again!
If you’re late to class, I will send you back home!
How many times have we gone through this situation in school? In fact, we have been late at times just to miss classes or sneak out of school to bunk classes.
But the phrase, Don’t be late is somewhat stuck to our conscious and we strive to be on time always!
And this also applies to payments more specifically settlements/presentments, here’s why!
Before that let’s understand Settlement/Presentment. It is the final stage of a transaction where the funds are transferred from the issuer to acquirer when the merchant submits their sale receipts.
And they should never be late doing so!
Why you ask?
Because if they are late, it will result in a chargeback!
And it comes under the reason code named Late Presentment.
You can read the basics of Late Presentment here!
Read it later or now but do come back here as we are exploring things that have not been recorded anywhere before!
Let’s march on!
So, if you are using a card to complete a purchase, then the chargeback reason of late presentment applies. But not for our Indian wonder, UPI because NPCI does initiate transaction settlements in a schedule of 6 cycles per day.
When does a Late Presentment happen?
It happens when the merchant has missed the settlement time window for a payment transaction and does it a day, week or month later. Usually, this scenario is a common occurrence in pre-auth scenarios of hotel, flight bookings but not limited to them.
Putting this scenario into two different perceptions…
Imagine you paid at an office designated restaurant and got the charge in your credit card a month later. That’s a classic example of late presentment. So, what would your natural reaction be?
Scenario 1:
1. You will immediately contact your bank and berate your customer care for charging with an amount you didn’t pay for or don’t remember paying for or claim it as fraud
2. They then proceed to explain as this was a corporate card and you have a standing instruction on that card for this particular restaurant, hence the charge.
3. But as a customer, you won’t accept as you have a valid reason to put forth. And that would be” if I had used the card a month ago, then it should have shown up in the last billing cycle and not in this billing cycle” which is totally valid.
4. And the customer care would say a standard response of “Don’t worry sir/madam, we will sort out this issue and raise a concern/complaint immediately”
In the curtain call, a chargeback will be raised and sent to the merchant via the acquirer. And the merchant ends up losing on many fronts like loss of service/product, fees and peace of mind.
Scenario 2:
This does not affect you!
Because in this scenario, the money would have been already debited from you and would have showed in the bill too. But the amount debited would be still with your issuer and when the merchant claims that amount after the settlement window, the late presentment clause will apply.
So why does Late Presentment occur?
Basically, it is a technical error that occurs sometime in the ISO messaging format that was designed in 1987. Even though there has been striking changes in payment systems, these standards still operate on the yesteryear’s model.
Meaning the base is strong, but significant enhancements are missing and there’s no set way of using this messaging format. Acquirers and payment service providers are free to use this standard as per their requirements, leading to unprecedented technical errors. Sometimes there are cases when the presentment was done late knowingly as well, leading to late presentment chargeback.
However, not the one to be deterred, Visa has brought a modification to this reason code. They took it out of the collaboration flow and merged late presentment within the allocation flow.
Meaning the reason 12.1 no longer exists, you can only file late presentment under 11.3 reason starting from April 13th, 2024 , and the timeline for raising a chargeback has brought down to 75 days from 120 days.
Do make note of this crucial piece of information if you’re analyst working on either side of a transaction i.e. issuer or acquirer.
Why this timeline now a problem?
Well, here’s the reason. Many countries across the world have their standard set of presentment timeline for both domestic and international transactions.
For example, here are some timelines of domestic transactions, to name a few
So, let’s take Japan, it has 30 days for presentment, meaning if there’s a late presentment chargeback request, the acquirer has now only 75 days from the date of presentment for the entire chargeback lifecycle. And it could mean some serious and rigorous manual work of coordinating with the merchant and obtaining documents that prove them right.
This scenario applies to every other region as well.
Imagine the pain that you as an issuer or acquirer has to go through to tackle this chargeback. But all is not lost, there’s UDM to the rescue.
For Issuers:
UDM will validate the incoming complaints based on the customer’s replies and transaction data to check the eligibility for late presentment. It will save time and efforts of your analysts and prevent them from submitting an invalid chargeback and paying hefty network fees.
For Acquirers:
If there’s an incoming late presentment dispute, UDM will automatically validate the authenticity of that claim against the network core rules and with transaction data as the base. If found wrong, UDM will instantly reject the claim and send the representment docket saving you from a manual research, follow-up and validation.
Want to know more about UDM? Then get in touch with us today!
