What is the difference between procedural chargebacks and substantive chargebacks?

The distinction between procedural and substantive chargebacks lies in the reasons and circumstances surrounding each type. Procedural chargebacks typically arise from errors made by merchants regarding transaction processing or compliance with payment processing rules. For example, a procedural chargeback may occur if a merchant fails to provide a valid transaction receipt, does not process a transaction according to the established guidelines, or fails to respond to a customer’s inquiry appropriately regarding a legitimate charge.

On the other hand, substantive chargebacks occur when a customer disputes a charge for reasons related to the quality of goods or services received. This can include issues like fraud, unauthorized transactions, or goods being defective or not delivered at all.

Thus, the important takeaway is that procedural chargebacks are centered around merchant-related issues within the transaction process, whereas substantive chargebacks are grounded in the customer’s experience and satisfaction with the transaction. Understanding this distinction is crucial for payment professionals when analyzing chargeback trends and addressing disputes efficiently. This knowledge can help in establishing better practices and communication channels to minimize chargeback occurrences, both procedural and substantive.