Disputing Chargebacks

What is a Chargeback?

A chargeback occurs when a guest disputes a transaction with their bank or credit card issuer, resulting in the reversal of funds back to the guest. This can happen if the guest believes a charge was unauthorized, fraudulent, or did not align with the agreed terms, such as your hotel's cancellation policy. Chargebacks are intended to protect consumers, but they can create significant challenges for hotels. Unfortunately, chargeback fraud, also known as "friendly fraud," is a growing concern where guests dispute legitimate charges to receive refunds while still benefiting from the services.

Defending Against Chargebacks in a Hotel

Hotels can defend against chargebacks by:

• Clearly Communicating Cancellation Policies: Ensure that guests are fully informed of your cancellation policies at the time of booking. Display these policies prominently on your website and in booking confirmations.
• Maintaining Detailed Records: Keep comprehensive records of all reservations, including booking confirmations, cancellation requests, and any communication with guests. This documentation can be used as evidence in the event of a dispute.
• Providing Excellent Customer Service: Address guest inquiries and concerns promptly to resolve potential issues before they lead to chargebacks. Offering solutions or alternatives can help prevent disputes.
• Securing Authorization for Charges: Obtain explicit authorization for all charges, especially for no-show or cancellation fees. This can include signed agreements or electronic confirmations.

Minimizing Exposure to Chargebacks

To minimize exposure to chargebacks, hotels can:

• Use Address Verification Services (AVS): AVS helps confirm that the billing address provided by the guest matches the cardholder’s address on file with the issuing bank, reducing the risk of fraud.
• Require Card Verification Value (CVV): Requesting the CVV during the booking process helps ensure that the guest has the physical card in their possession.
• Implement Flexible Cancellation Policies: Consider offering flexible cancellation policies that provide guests with options to modify or cancel their reservations with minimal penalties, reducing the likelihood of disputes.
• Collect Payments at the Hotel: Use a terminal for in-person payments at check-in or check-out to verify the guest’s identity and cardholder information physically.
• Encourage Online Payments through 3D Secure (3DS): Implement 3DS for online payments, which adds an extra layer of authentication, requiring the cardholder to confirm their identity during the transaction, thereby reducing fraudulent activity. Through Clock PMS+ this can be achieved by: 
  • requesting payment at time of booking on the BookDirect (your guarantee policies need to be configured to require such); 
  • encourage guests to pay via the Online Check-in (you must configure it to require payment); 
  • encourage guests to guarantee their booking or pay their bill through the Self Service Portal.
• Educate Staff on Chargeback Fraud: Train staff to recognize potential signs of chargeback fraud and encourage them to gather and document all relevant transaction details.

How do you know that a Chargeback occured?

There are 2 ways to know that a chargeback occurred:

• In Clock PMS+: you will receive a ToDo in ToDo channel 'Payments' with the message: NOTIFICATION_OF_CHARGEBACK or NOTIFICATION_OF_FRAUD. The message will contain the transaction PSP reference number and the Dispute reference number

• In Adyen Essentials: the chargeback will appear in the 'Disputes' section in your Adyen Essentials account.
• Email notification: access Adyen Essentials, go to section 'Notification settings' and enable email sending for 'Fraud notices' and 'Chargeback notices'. The messages will be sent to the email address associated with the user with which you've accessed 'Essentials'.

What to do once you are notified about a Chargeback?

Firstly, please note a couple of clarifications:

• a notification doesn't necessarily mean that funds have been returned to the card-holder (guest). Depending on the type of dispute that has been raised by the card-holder, you may be required to provide information about the transaction in a timely manner. Failing to do so in the specified time period will result in a chargeback and return of funds. If the information satisfies the issuing bank and card scheme, the dispute will be closed. If the information doesn't satisfy the issuing bank and card scheme, a chargeback will be issued.
• however, in most cases, a chargeback has been issued and funds have been returned to the card-holder.
• the payment in Clock PMS+ is not affected by the chargeback (not voided)
• you can either accept the chargeback or dispute it.
• some chargebacks cannot be disputed. Depends on the cards scheme and reason for chargeback.

Disputing a Chargeback

To dispute a Chargeback:

• Login to your Adyen Essentials account
• Navigate to the 'Disputes' section, locate the chargeback and open it
• Click on 'Handle dispute', choose your defense and submit the required information. 

Result of your Dispute

In your Adyen Essentials account you can keep track of your disputes and whether you've Won or Lost the dispute. 

Refund or Chargeback?

If you believe that a Chargeback is imminent (and that you won't be able to dispute it successfully), for example, you've had issues with the guest during their stay, it is better to Refund the amount than wait for a Chargeback. Chargebacks are associated with extra costs to you (as stipulated in your Payment Enablement contract with Clock) and have a negative effect on your account statistics and risk assessments.