Disputes (also commonly known as chargebacks) occur when a customer contacts their bank to reverse a payment. When the issuing bank submits this request, AIO Pay processes the dispute and temporarily withdraws the transaction amount along with a processing fee from your account.
By understanding the dispute flow and following best practices, you can protect your business, reduce financial losses, and increase your chances of winning disputes.
What Is a Chargeback or Dispute?
A chargeback or dispute happens when a customer questions a transaction and asks their bank to return the funds.
Here’s what happens:
The issuing bank files a dispute on behalf of the customer.
AIO Pay deducts the transaction amount and a chargeback fee from your account.
You can either accept the chargeback or defend it.
If you defend it, you must upload defense documents.
The issuing bank reviews the evidence and decides the outcome.
If your defense is accepted, the funds are returned to you.
If the customer withdraws the dispute, the funds also return to you.
How the Dispute Flow Works
Although the exact steps vary by payment scheme or card network, the overall flow remains similar.
Transaction and Dispute Flow
Transaction Settled → Funds Sent to You
Cardholder Disputes → Goes straight to Chargeback
1st Chargeback
Status: Chargeback
Funds are withdrawn from your account.
A chargeback fee is applied.
Your Options:
Accept → Funds stay with the customer. Case closed.
Defend → Submit defense documents. Status becomes Pending.
Once documents are submitted, the chargeback is temporarily reversed and the funds return to you while the bank reviews.
Issuing Bank Reviews Defense
A. Defense Declined
Status: Lost
Funds go back to the customer
Final stage → leads to 2nd chargeback
B. Defense Accepted
Status: Won
Funds stay with you
Case closed
2nd Chargeback
Status: Lost
The fee is charged again
You cannot upload more documents
Final outcome stands
What Do Chargeback Statuses Mean?
Status | Meaning |
Undefended | You can still submit defense documents. |
Pending | Defense submitted—bank is reviewing. |
Won | Defense accepted or dispute withdrawn. |
Lost | Defense rejected, and a second chargeback was issued. |
Dispute Status Throughout the Flow
Dispute Status | Description |
Chargeback | Formal dispute filed and funds withdrawn. |
InformationSupplied | Defense submitted. |
ChargebackReversed | Funds temporarily returned while under review. |
SecondChargeback | Defense rejected. Final stage. |
Stage 1.0: Pre-Dispute Best Practices
Proactively reduce disputes before they happen:
Know the full dispute flow
Understand common dispute reasons
Offer fast, clear customer support
Honor refund/cancellation requests
Use clear billing descriptors that customers recognize
Display terms and policies clearly on your website
Stage 1.5: Notification of Fraud (NoF)
A Notification of Fraud means the cardholder reported the transaction as fraudulent.
This is not yet a chargeback. No funds are withdrawn.
However:
If no 3D Secure liability shift exists, it may become a chargeback.
Review the transaction.
If fraud seems likely, refund the payment and stop shipment.
Stage 2.0: Chargeback Begins
At this stage, funds and the processing fee are deducted.
What to do:
Review the chargeback in the AIO Pay Payout Report pop-up.
Check the reason code and any issuer notes.
Gather defense documents based on the reason.
Write a strong rebuttal letter.
Submit before the deadline.
Stage 3.0: Monitoring the Outcome
Once your defense is submitted, AIO Pay passes it to the issuer (and sometimes the card scheme).
The issuer has 45–60 days to review.
If approved, funds stay with you.
You can track all dispute trends and progress in the
What Do Reason Codes Mean?
Every dispute has a reason code explaining why it was filed (e.g., fraud, product not received, duplicate charge, etc.).
Why it matters:
Helps you decide whether to accept or defend.
Defense requirements depend on the reason.
Some defenses require specific evidence (e.g., proof of refund, delivery confirmation).
Always review the Reason Code List and follow the defense requirements.
What If a Chargeback Is Withdrawn?
A chargeback can be withdrawn by the issuer or cardholder if:
They recognize the transaction later.
The dispute was opened in error.
You resolved the issue directly with the customer.
Important notes:
The withdrawal may not appear in the normal flow.
Even withdrawn chargebacks count toward your chargeback rate.
You cannot refund once a dispute is open or lost.
You may still need to provide proof if requested.
If the customer claims they withdrew the dispute but you don’t see it, contact AIO Customer Support (844-565-1637) with proof from the issuing bank.
Key Takeaways
Disputes are reversible if you act quickly and provide the right evidence.
Understanding statuses and timeframes is essential.
Preparation is your best defense.
Use AIO Pay Payout Reports to monitor and improve over time.
You’re Now Ready to Manage Disputes Like a Pro!
Disputes don’t have to be intimidating. With the right knowledge, proactive strategies, and strong documentation, you can minimize losses and protect your business.
AIO Pay gives you the tools — understanding the process helps you win.