What Are Chargebacks and
What are Reason Codes?

Chargebacks are a form of consumer protection for credit card holders, introduced as part of The Fair Credit Billing Act of 1974.

Essentially, a chargeback voids a card transaction, withdrawing funds that were previously deposited into the merchant’s bank account and applying a credit to the cardholder. Chargebacks are normally used to dispute a card transaction and secure a refund for the cardholder.

The cardholder, rather than contacting the business for a refund, may go above the merchant’s head and asks the bank to forcibly remove funds from the business’s bank account. If the bank feels the cardholder’s request is valid, the funds will be removed from the merchant’s account and returned to the cardholder.

What are Reason Codes?

Chargeback reason codes were created to standardise the list of acceptable reasons why a bank may file a payment card chargeback on their cardholders/customers behalf.

A reason code is usually a 2-to-4-digit alphanumeric code provided by the issuing bank involved and is used to identify the reason for the dispute. Each of the major card brands, including Visa, Mastercard, have their own system of reason codes. Reason codes can be important and support the merchant, to understand why and then look to address the reasons as to why the chargeback is being filed. This could highlight poor customer service, inferior products or a problem with the distribution/supply chain. It could also highlighted potential areas, where security/process may need to be improved.

On receipt, of the reason code, the merchant can decide to accept or challenge the chargeback. If the merchant chooses to dispute, it must use the reason code to evidence why it felt the original transaction was valid and true.

Card Schemes - Visa and Mastercard Reason Codes:


Visa Claims Resolution (VCR) was introduced in 2018 and was a significant overhaul of their reason code process, designed to prevent fraudulent claims from becoming chargeback disputes.

Essentially, they have split the reason codes into four categories. Each category has a list of reason codes, to which the cardholder can file a dispute against.

  1. Fraud Related
  2. Processing Errors
  3. Authorisation Errors
  4. Customer Disputes


Similar to Visa, Mastercard reduced their list of reason codes down into 4 categories in 2016.

  1. Authorisation
  2. Cardholder Dispute
  3. Fraud
  4. Point-Of-Interaction Errors

How does our innovation help combat chargebacks?

Our cloud​-based technology does not require any additional hardware or amendments to existing telephony or​network set up and is Acquirer and Payment gateway agnostic. Totally eliminating the need for capital expenditure, SOTpay can support businesses of all shapes and sizes in any sector.​

SOTpay​eliminates the risk of fraud related chargebacks for businesses, by authenticating MOTO and ​Omni channel CNP transactions and processes the payment in a PCI compliant manner, converting a risky ‘non​-secure’ transaction into a ‘secure, authenticated, compliant’​transaction in the eyes of the acquiring partner, the merchant can see significant savings in their​Merchant​ Service Charge's.​ We have seen businesses save in excess of £40,000 per annum,​following the deployment of SOTpay.​

SOTpay enables you to send out an electronic payment request in real time, via email, SMS, web chat or electronic invoices.

The flexibility of the SOTpay technology enables the merchant to accept secure and compliant​ transactions across numerous channels, boosting business by allowing cardholders to complete​ transactions in their desired channel of engagement. For example, if someone is engaging with the​ business on Facebook, SOTpay allows the business to take payment within the Facebook Messenger​ environment.

By preventing cardholder data in its entirety from entering the merchant environment, SOTpay makes achieving and​maintaining PCI DSS compliance easier and more manageable for your business. With liability for fraud related chargebacks eliminated the merchant can also deliver to an alternative​ delivery address, instead of just to the registered cardholder’s address.

As a disruptive payment technology, the PCI SSC updated their Global ‘Protecting Telephone Payments’​ guidelines to include our innovative approach, which gave us tremendous credibility within the​ acquiring industry. We have subsequently become partners to some of the largest payment​ organisations in the world, helping to protect and support​ their merchants against the challenges that business face.

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