What does the term "issuer-initiated chargeback" refer to?

The term "issuer-initiated chargeback" refers specifically to a chargeback process that is started by the card issuer. In this scenario, the card-issuing bank identifies a potential issue with a transaction, such as fraud or a billing error, based on information they receive from the cardholder or their monitoring systems. The card issuer then acts on behalf of the cardholder to reverse the transaction, which means that they initiate the chargeback directly to recover funds for the customer.

This process is different from a merchant-initiated chargeback or any transaction reversal triggered directly by the customer, as it highlights the role of the issuer in investigating and acting on behalf of the cardholder. Understanding this distinction helps clarify how chargebacks can be initiated within the payment processing ecosystem, emphasizing the responsibilities and functions of different parties involved in a transaction.