Merchants who receive a chargeback for a transaction placed with an American Express card may encounter reason code P23, which indicates a transaction that was not processed correctly by the merchant. The actual underlying cause of this chargeback is usually merchant error, but it may be associated with friendly fraud as well. Merchants who believe they have received an invalid chargeback under reason code P23 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is American Express Chargeback Reason Code P23?
American Express chargeback reason code P23 falls under the “Processing Errors” category. The shorthand description is “Currency Discrepancy.” When you see this reason code, it means that the merchant did not use the correct form of currency when processing the transaction, resulting in an erroneous charge amount or an unfavorable conversion rate for the customer.
Many domestic merchants will never have to worry about encountering chargebacks with this reason code, but it can cause lots of problems for merchants who deal with a high number of international customers.
What Scenarios Might Lead to This Chargeback?
Merchant error is the most common cause of this chargeback reason. They may select the wrong currency type when processing the transaction, resulting in the customer being charged the wrong amount. This is more likely to happen with merchants who rarely deal with foreign currencies and aren't used to processing transactions that involve currency conversion. Sometimes, merchants will use Dynamic Currency Conversion without getting the customer’s permission first. This practice is prohibited by the card networks, but merchants still do it out of neglect or forgetfulness on occasion, and customers don’t always understand the implications of Dynamic Currency Conversion when it isn’t sufficiently explained to them.
Sometimes, a customer may forget what currency they used to pay for a purchase, which may lead to them mistakenly filing a friendly fraud chargeback. A customer might also purposefully commit friendly fraud if they realize that the conversion rate caused them to pay a higher price for a product than they initially assumed.
Services like Dynamic Currency Conversion often charge a higher conversion rate that may cause the total transaction amount to be significantly greater than what the customer was expecting, which can lead to buyer’s remorse and subsequent disputes.
What are the Important Timeframes?
The acquirer and/or merchant have 20 days to respond to this chargeback after it is filed. No special timeframes apply to the cardholder.
How Can Merchants Fight this Chargeback Code?
Under certain circumstances, you may be able to successfully fight this chargeback. The evidence you submit should include one of the following items:
- If currency conversion did not occur, provide documentation that clearly shows this.
- If you have already processed a refund for the transaction in question, you can fight this chargeback by providing documentation that proves you have credited the cardholder’s account.
How Can Merchants Prevent this Chargeback Code?
You can safely steer clear of these chargebacks by avoiding any currency conversions in your transaction process, but this isn’t a realistic option for all merchants. Whether you’re using Dynamic Currency Conversion or some other method of accepting international currency, you need to have a thorough understanding of the rules, procedures, and costs, and explain them carefully to your customers before completing a transaction with them.
The following suggestions can help you avoid disputes related to international currency conversion and protect your revenue from any chargebacks that might otherwise result:
- Have systems in place to manage multiple currencies, especially if this is something your store frequently has to deal with. Make sure staff are well-trained on procedures related to payments using international currencies.
- Don’t automatically convert currencies for international shoppers. Allow customers to opt-in to conversion services such as Dynamic Currency Conversion if they are interested, but don’t require their use.
About American Express Chargeback Reason Codes
Reason codes are alphanumeric codes that provide the justification for granting a chargeback. Pursuant to the Fair Credit Billing Act of 1974, cardholders have the right to dispute unauthorized or erroneous charges and issuing banks must reverse a disputed transaction of the cardholder’s claim is valid.
When a cardholder contacts their issuing bank to dispute a transaction and receive a chargeback, the dispute is assigned a reason code that most closely matches the substance of the cardholder’s claims. The reason code provides the merchant and other stakeholders in the dispute with a concise explanation for why a chargeback has been granted.
Each card network—Visa, Mastercard, American Express, and Discover—defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands.
As both a card network and an issuer, American Express specifies 34 reason codes under the categories of Fraud, Authorization, Processing Errors, Card Member Disputes, and Inquiry/Miscellaneous. Each American Express reason code consists of one or more letters, indicating the category, and a number that identifies the specific dispute reason.
Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. Identifying the chargeback reason code and the evidence required to fight it is the first step in chargeback representment, and analyzing your chargeback reason codes can provide you with insights into what types of disputes are causing you the most trouble. With this information, you can determine the root causes of your chargebacks and take action to prevent them from reoccurring.