Transaction Disputes and Settlement: Rudra Prasad Adhikari


In general, most of the banking transactions are completed successfully, but sometimes things go wrong, and transaction cannot be completed due to various reasons. It means the account get debited but the receiver couldn’t get payment, a transaction in such a situation is known as disputed transaction.
Transaction disputes may be observed in card and other digital payment methods. In case of card, when the cardholder tries to withdraw cash from ATM machine or tries to make payment swiping card in POS machine, the cardholder’s account is debited but cash cannot be withdrawn from machine or payment to the merchant cannot be made.
ATM dispute may be of full dispute in which card user is unable to collect whole amount of cash as debited from his/her account or of partial dispute in which card user can only collect partial amount of cash as deducted from his/her account. And sometimes, ATM machine may dispense cash more than the requested amount, debit more times than requested or reverse double.
Dispute may also emerge when an individual tries to transfer fund through digital wallet or mobile banking or internet banking application. The fund is deducted from sender’s account but the receiver’s account couldn’t be credited. In turn it may result in merchant payment failure, top up failure, failure in digital wallet loading etc.
In digital transaction, sometimes the fund may be transferred to the undesired account knowingly or unknowingly and sometimes there is double debit from the sender’s account crediting the receiver’s account only once due to systemic errors creating dispute in the transaction. As the customers couldn’t complete transaction in urgent although their account get debited, disputes are extremely bothersome.

There may be several reasons behind transaction disputes. The reasons may vary particularly from ATM debit or credit cards to banking applications or digital wallets. Poor network connection, minimum task completion time of involved entities, suspecting and abortion of fraudulent transaction, unsupported or misconfigured payment gateway etc. are the common causes.
In the poor network connectivity, the Core Banking System (CBS) server couldn’t respond on time and there will be delay in either debiting or crediting the account. Huge traffic of transactions may also suppress the performance of the system. If the network is suddenly disrupted, the ongoing transaction will be declined and dispute may appears.

Next for the security concern, minimum task completion time has been set for the entities involved in transaction such as customer, merchant, payment gateway, payment processor, card or system network, issuing bank or agency etc. It means certain tasks has to be completed within given time frame otherwise the whole transaction process cannot be completed and the transaction is failed with reason ‘time-out’.
The multiple entries of PINs & passwords, frequently trying to use the same & wrong account details, making frequent attempts in same OTP or delaying in the use of OTP etc. may lead to suspected fraudulent transaction and the system may instantly decline the transaction process.
Another reason for disputed transaction is the unsupported or misconfigured payment gateway. When a transaction between accounts operating in two different gateway should be accomplished, complication may prevail due to improper configuration. As a consequence the mismatch in transaction code, response code, tracing ID, transaction limits, account parameters, access channel etc. are observed in the incomplete transactions.
Transactions are also failed due to downtime set for the maintenance of the system or server and for the data migration. In addition, the long authentication process and fraud controlling mechanisms set by banks & payment service providers may lead to transaction failure.

In most cases the disputes are settled automatically within 24 hours automatically i.e. the amount is credited back to the account from which it was debited or will be transferred in the receiving account. However, it is not sure that all disputed transactions will be settled automatically, in such cases they should be settled manually. Manual settlement involves certain procedures and takes certain time depending on the type and level of dispute.
In case of ATM disputes, manual settlement takes time of a single day to 60 calendar days depending on the dispute occurrence terminal either that is of issuer or of acquirer. It involves the processes: Chargeback, Re-presentment, Pre-Arbitration or Pre-Compliance, Arbitration or Compliance and finally Reconciliation. In some cases it requires CCTV footage check for confirmation of the dispute.
When customer swipe the card in the ATM/POS of card issuing bank and if any dispute occurs then its settlement takes a single day to one week’s time period whereas it takes longer in case the card swiped in other bank’s ATM / POS terminal. Similarly, the fund transfer disputes in digital transaction are settled within a week in general, however sometimes it may takes longer time due to delay in generating and exchanging reconciliation reports .
The inter-operability of Quick Response codes (QR codes) would be supportive for minimizing disputes. Also, sharing a common payment gateway between the banks, financial institutions and payment service providers would be beneficial.
For the early dispute settlement, customers should fill up and submit the dispute declaration form in the form of hardcopy visiting the nearest branch or through online submission mechanism as specified by the banks or payment service providers.
Nepal Rastra Bank (NRB) the regulating body of banks and financial institutions (BFIs), had also clearly stated in its IT guidelines that the banks should develop dispute handling mechanism with expected timing of bank response, to handle disputed payments, transaction and other issues in electronic banking delivery channels.
Customers should be aware about the transactions made with their accounts are either successful or not, when and with which accounts the transaction are made and the account is refunded after dispute or not, by checking the statements regularly.
To minimize the disputes customers are suggested to use alternate payment methods if the network connectivity is very poor and if they are not sure for the account credentials including PINs, passwords and other details.
When we use card, banking app or wallet in rush, having limited fund in our account, and if we entrapped into dispute it will be troublesome because we have to wait for settlement time period.
From the BFIs side also the dispute settlement time should be minimized as much as they can adjust. Realizing the emergence need of customer, BFIs should prioritize the dispute settlement works and try to resolve the issues as soon as possible. It is their duty to inform the customers earlier if they are going to work for server maintenance, system upgradation or data migration.
To attenuate the number of disputed transactions and ensure the timely settlement of such disputes the NRB, BFIs, payment service providers and the stakeholders should work in tandem and be equally responsible.

(Writer Adhikari is an IT Professional at Rastriya Banijya Bank and regularly writes Fin-Tech articles )