A chargeback mechanism is a dispute redressal mechanism that a cardholder can use to claim a refund in case of a fraud, dispute or even denial of service like refusing to deliver a product within the promised number of days.

Here’s what happens when a chargeback request is raised:

- You fill up a form and submit it to the bank (issuing bank) that issued you the card with which you transacted. You will need to submit the transaction details along with the reason for raising the chargeback request.

- The issuing bank will then trace the trail and raise the request with the acquiring bank, the bank where the money got deposited.

- The acquiring bank will then investigate where it settled the transaction—it could be the merchant itself, a payment facilitator or aggregator.

- The acquiring bank will then raise the chargeback with the payment aggregator, which will then trace the merchant.

- The merchant will then either accept the chargeback or contest it. The merchant can contest the claim by providing a proof of delivery of the goods or services. This will be communicated to the acquiring bank, the issuing bank and the consumer.

- If the merchant accepts the chargeback, it will be an acknowledgement of not providing the said service. The payment aggregator will then deduct from the merchant’s account and pass it on to the acquiring bank, which in turn will pass it on to the issuing bank, and finally the money will reach the cardholder.

- If the merchant does not respond within a given timeline, then too the aggregator will debit the merchant’s account and pass on the amount to the consumer.

- If the consumer claims to not have received the service even after the merchant furnishes proof, the merchant will need to provide additional proof.

- If the dispute is still not resolved, it will go into an arbitration phase wherein the entire transaction will be investigated by the payment service providers and the side found to be in violation—the merchant or the consumer—will have to pay a penalty at the end of the inquiry.