Payment Gateway & UDM- Made In Heaven

Backspace Tech
4 min readOct 6, 2023

· Searching for the best solutions to bring down your high-risk merchant’s chargeback ratio?

· Looking to improve the efficiency of the pre-dispute process and lower your merchant’s chargeback fees?

Well, then you are in the right place. Before we get into the specifics of how let’s know the why!

Pre-Dispute:

When a customer raises a complaint about the nature of goods or transactions with a certain merchant directly via the payment gateway (PG) provided link, it is known as a Pre-dispute.

As a standard process, customers are encouraged to directly get in touch with the seller and amicably resolve the issue. Additionally, there is also a waiting period of 7–10 days for product delivery before such an issue is raised. If a customer is unsuccessful in resolving it with the merchant, the PG takes on the role of a mediator.

This mediation often results in one of the two remedies:

· The customer is issued a full refund/replacement of the product.

· Or is denied remedial measures as it is against the policies of the merchant.

Journey of pre-dispute to chargeback (Current Scenario):

· Customer initiates a complaint regarding the transaction/product via PG provided link. As a standard practice, this link will be present in the payment email notification sent by the PG to the customer’s registered email address.

· In the pre-dispute phase, the usual participants- issuer, acquirer, and card network are not involved in the conversation.

· The conversation loop only includes three participants, the customer, the PG, and the merchant.

· Once the customer initiates the complaint and provides the requisite details to the PG, a reference number is generated, and the customer is encouraged to directly contact the merchant to resolve the issue/ wait for a certain time period before proceeding further.

· If all these avenues are exhausted, the PG takes on the role of a mediator.

· In the meantime, the PG converses with the merchant to choose either of the two options:

1) To accept the complaint and issue a refund/replacement

2) To contest against the same

· If the merchant chooses to contest, the PG then proceeds to collect the necessary evidence such as delivery records, proof of transaction, invoice, merchant policy, etc from the merchant.

· After a thorough assessment, the appropriate reason for refusal is passed on to the customer via PG’s set mode of communication.

· In case the customer is not appeased with the reason, they will lodge a dispute with their issuing bank. This dispute will traverse through the standard route of issuer, card network, acquirer, PG, and merchant.

Challenges in the current scenario:

· Communication with merchants for either acceptance or refusal happens most often manually. It is a tedious process and can often get lost in the shuffle.

· The PG is at a loss as they don’t have access to the right set of tools that will help their merchants upload their side of evidence within the timeline applicable for the dispute.

· There is no trail of the pre-dispute actions as they are manually led which ends up in the merchant being liable for the chargeback.

· PG doesn’t have access to the documents that led to the rejection of the customer’s claim in the pre-dispute stage if the complaint proceeds to a chargeback state.

· The merchant often ends up in the high-risk category and also incurs hefty fees and a low credit rating.

· The chargeback win ratio is low so PG cannot get the best rates from the acquirer for their services or the merchant.

How can UDM help?

UDM, acronym for Unified Dispute Management, is a product that is focused on helping and easing the pre-dispute cycle of payment gateways. With automation, intelligent processes, and AI at its core, UDM helps PGs and their legion of merchants to respond in real time to pre-disputes and disputes.

Here’s how it works:

Mr. A files a complaint against XYZ merchant via ABC Payment Gateway’s redressal link.

Mr. A must choose the appropriate reason for their grievance and answer a few questions before proceeding further. Based on Mr. A’s response, the system will assign the appropriate reason that matches with the nature of the complaint. Then UDM will automatically send a notification to the XYZ merchant requesting a response in their preferred channel of communication (SMS, WhatsApp, or Email).

· If XYZ accepts, PG will be notified, and a refund will be issued to the customer.

· If XYZ decides to contest, UDM will send a link asking the merchant to upload the concerned proofs and the same can be conveyed to the customer.

Note: All this happens in real-time

What happens when the customer goes on to file a dispute for the same complaint?

When the customer files the chargeback for the same transaction, it will be cross-referenced against the complaint records and mapped to the pre-disputed transaction. Here the common elements such as RRN number, and Transaction ID will help in the identification of the pre-disputed transaction.

As the merchant has already uploaded the evidence disproving the customer’s claim, the PG can effortlessly share the same with the acquirer on day zero of the received complaint or based on their turn-around time.

Why this helps?

· A payment gateway can effectively manage their pre-dispute cycle within their system in real time.

· PG can automate chargeback acceptance or representment, thereby lowering their manual dependency on analysts.

· PGs can protect their merchants from falling into the high-risk category and improve their win rate, especially in the case of first-party fraud.

· By offering end-to-end connectivity and on-time communication, PGs can enjoy an additional revenue stream.

· They can get better rates and become preferred partners for acquirers.

Want to know how you can integrate UDM? Then Get in touch with us today!

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Backspace Tech

Backspace Tech offers Fintech-as-a-Service to automate,simplify, and disrupt the payment industry by handling chargeback requests through a plug-and-play model.