Apple Pay Dispute & Chargeback Guide for Merchants in 2024

I’ll explain how chargebacks work with Apple Pay (and other Apple programs). Then I’ll talk about the differences among various Apple programs and how to prevent chargebacks.

Let’s learn whether this program is worth using.

Key Takeaways

• Apple has a separate dispute process for Apple Cards.
• There are no published chargeback fees for Apple Card disputes.
• Chargebacks for other cards stored in Apple Wallet will go through other card networks.
• Merchants have seen a 25% reduction in chargebacks when using Apple Pay.
• Apple doesn’t specify a time limit for merchants to reply to disputes.

Does Apple Pay Have Chargebacks?

Yes, Apple Pay does have chargebacks. Apple Pay is the system used to pay for transactions, not the card. If a shopper had an issue with a Mastercard stored on Apple Wallet, they’d dispute the transaction with Mastercard.

Let’s say the customer disputes a transaction with Mastercard.

That would get the following parties involved:

• Apple(acquirer): Gives the bank the transaction information.
• Customer: Disputes the transaction.
• Merchant: Provides evidence.
• Bank (issuer): Reviews evidence and decides the winner.

The customer may have dispute a transaction with an Apple Card (Apple’s credit card). In this scenario, the issuer is Goldman Sachs, who partnered with Apple for this card.

Goldman Sachs would then manage the dispute process, which I’ll talk about in a bit.

Summary: Apple Pay has chargebacks; customers can dispute transactions like credit cards.

Okay, Can Apple Pay Help Reduce Chargebacks, Then?

Bear with me here.

In 2020, PayNearMe saw a 25% reduced chargeback rate for their total card payments [1]. Reducing the number of chargebacks. And they noticed that their merchants won 7 times more chargebacks on transactions that used Apple Pay.

There’s a caveat to this.

They don’t specify which industries had the higher rate. Nor the sample size for their data. Those numbers are impressive if true.

Here are some Apple Pay “features” that might contribute to this point:

• The real card details are never shared with merchants, reducing the risk of card number theft.
• Apple Pay encrypts all transaction data. This makes it difficult for hackers to access sensitive information.
• Customers use Face ID, Touch ID, or a passcode to authorize payments.
  • Confirms transaction completion solely by authorized user.
• Apple devices store payment information in a dedicated chip known as the Secure Element.
  • This isolates payment data from the device’s main operating system, reducing exposure to malware.
• Apple Pay’s algorithms detect potential fraud and prevent unauthorized transactions.
• Customers can immediately spot unauthorized transactions.
• The contactless nature of Apple Pay minimizes manual entry errors at the point of sale.
• Happy customers are less likely to dispute legitimate transactions.

I’m not savvy with cybersecurity and can’t explain how Apple Pay’s tokenization works. I’ll let this video do it, instead:

You may still encounter friendly fraud chargebacks from folks trying to score free products. For instance, Apple Pay won’t protect you against “item not received” chargebacks. They will reduce the surface area so that customers can dispute transactions.

Apple has guardrails in place to ensure that the customer is making the purchase. Thus, it’s much harder for them to argue that they didn’t authorize an Apple Pay transaction.

Sellers also have a much better chance of winning friendly fraud chargebacks versus fraudulent ones [2]:

• 43.82% win rate for friendly fraud chargebacks
• 9.27% win rate for true fraud chargebacks

With fewer fraud chargebacks, you also reduce your chances of a card network placing you in a fraud monitoring program. Such programs result in higher chargeback fees and could result in you losing the ability to process certain cards.

Is Apple Pay a good way to reduce chargebacks? Absolutely.

Summary: It can help reduce chargebacks by using authentication to ensure that the cardholder always makes the purchase.

Dispute Process Time Limits

• Respond to a Chargeback:
  • Discover: 5 days
    • Retrieval requests: 20 days
  • American Express: 20 days for inquiries and chargebacks
  • Mastercard: 45 days
    • Second chargeback: 30 days
  • Visa: 20 days

Apple doesn’t specify time limits for merchants regarding Apple Card dispute processes. If Goldman Sachs requests information, they’ll tell you the time limit.

Otherwise:

Dispute process time limits vary depending on the bank and the card network.

This can differ based on the bank's policies. Merchants usually have 30 days to respond to a dispute. They must provide evidence to support the validity of the transaction. If the merchant does not respond in time, they lose the dispute by default.

How about customer time limits:

• File a Chargeback:
  • Visa: 120 days
  • Discover: 120 days
  • American Express: 120 days
  • Mastercard: 90 – 120 days
  • Apple Pay: 120 days

The time to file a chargeback will vary by card network and reason code. Some reason codes (e.g., fraud) give customers multiple years to file chargebacks.

Apple’s time limit is vague, though. One person claims to have spoken to their customer about it [3]. They quoted the customer service representative asking the customer to file a dispute “within 2 billing cycles.”

They also mentioned that they could “go back and get a charge” for these cases:

• Customer doesn’t receive an item
• Fraudulent charge

Again, vague.

But we can use Discover as an example of how far chargebacks can go. They have a reason code: “Good Faith Investigation.” This code allows customers to file a chargeback 2 years after the transaction date if there’s suspected fraud.

Summary: Dispute process time limits vary, but customers generally have 120 days to file.

Apple Pay Dispute/Chargeback Process

There are 2 routes that users could take depending on the card used:

• Apple Card
• Not Apple Card

Goldman Sachs, the institution through which Apple uses its cards, will deal with Apple Card-related disputes.

Card networks for non-Apple cards (e.g., Visa), will deal with those chargebacks.

1. Non-Apple Card Chargeback Process

• How Long it Takes: 75 – 120 days

Here’s the process that’ll happen when a customer disputes most card transactions:

1. The customer contacts their bank to report a problem with a transaction.
2. The bank reviews the claim and decides if it should proceed.
3. If the claim proceeds, the bank notifies Apple Pay.
4. Apple Pay informs the merchant about the dispute.
5. The merchant gathers evidence to prove the transaction was valid.
   1. This can include receipts, shipping records, and customer communications.
6. Seller submits the evidence to Apple Pay.
7. Apple Pay reviews the evidence and forwards it to the bank.
8. The bank evaluates the evidence.
9. The dispute is resolved based on the bank's decision.
   1. If the bank sides with the customer:
      1. The transaction is reversed.
      2. The merchant pays a chargeback fee.
   2. If the bank sides with the merchant:
      1. The charge remains.
      2. The merchant keeps the sale.

The actual process will vary by card provider. For instance, some networks have an Inquiry stage (request for information) before a chargeback happens.

2. Apple Card Dispute Process

• How Long it Takes: 90 days or up to 2 complete billing cycles

If a customer disputes a transaction they used an Apple Card for, the process looks like this [4]:

1. They report the issue on their Wallet app.
2. Customer receives a confirmation email.
3. Buyer receives a temporary credit for disputed amount.
4. Goldman Sachs requests evidence/information from customer and merchant.
5. They review the information and make a decision:
   1. Dispute approved: Temporary credit for customer becomes permanent, and seller may also have to issue customer a credit.
   2. Dispute denied: They reverse the temporary credit.

In short, it’s the same as the chargeback process, but Goldman Sachs is the issuer and acquirer. They’re the decision maker and the evidence gatherer.

Here’s a visual of a (supposed) customer service representative at Apple explaining the process:

Image source: Reddit

Apple Pay vs. Apple Card vs. Apple Wallet. vs. Apple Cash

In short:

• Apple Pay: Lets you make payments with your device.
• Apple Card: Credit card that you can use with Apple Pay or like a regular card.
• Apple Cash: A card on your phone for sending and receiving money.
• Apple Wallet: Where you keep your Apple Card, Apple Cash, and other cards.

Let’s go more in-depth.

Apple Pay enables users to pay for goods and services with their Apple devices. It uses Near Field Communication (NFC) technology for contactless payments in stores. Or secure transactions online or within apps.

I’ll explain how it works in a bit. For brevity sake.

Apple Card is a credit card made by a partnership with Goldman Sachs and Apple.

It’s integrated into the Apple Wallet app and offers features like daily cash rewards, no fees, and detailed spending summaries. Transactions with these cards are done through Apple Pay. So long as users use the digital version.

Shoppers can also request a physical titanium card where Apple Pay is not accepted. 

Source: Apple

Apple Wallet is an app that stores various digital items, such as:

• Credit and debit cards (including Apple Card and Apple Cash)
• Boarding passes
• Tickets
• Rewards cards
• More

Image source: Apple

Folks can add their cards to Apple Wallet to make payments via Apple Pay. The app organizes and tracks these digital items in one place, providing easy access and management.

Apple Cash is a feature within Apple Pay. It allows users to send and receive funds through iMessages. 

It works like a digital debit (or prepaid) card. Users add money to their Apple Cash card in Wallet to make purchases or transfer it to their bank account.

Isn’t that the same as Apple Pay? Nope.

Apple Cash is mainly for peer-to-peer (P2P) payments. That means sending money to friends and family. Customers could also use Apple Cash for transactions that don’t support Apple Pay.

Apple Pay is for making purchases at merchants who support Apple Pay.

Summary: Apple Wallet is where you keep all your cards. Apple Cash allows people to send and receive money. Apple Card is a credit card. Apple Pay is how you pay for transactions using your device.

How to Prevent Apple Pay Disputes

How you’ll prevent Apple Pay disputes shares the same methods as how you’d prevent chargebacks.

And some of those strategies are the following:

• Clear and detailed product descriptions: Helps customers know what they are buying.
• Offer excellent customer service: Respond quickly to questions and concerns.
• Keep records of all transactions: Examples include receipts and shipping information.
• Use strong security measures to prevent fraud: Encryption, secure payment gateways, etc.
• Maintain communication: Send confirmation emails and shipping updates.
• Resolve issues quickly: Before they escalate to disputes.
• Train your staff to handle disputes: They should know how to gather evidence and respond.

Most preventative measures involve being as honest with the customer as possible. Your goal is to make them understand what they’re getting into. That way, they’ll think it’s not worth fighting a chargeback.

You also want to reduce fraud as much as possible. They’re difficult chargebacks to win and could land you in fraud monitoring programs. Thus, ensure you watch out for red flags and safeguard customer’s data.

The safer the shopper’s data and account are, the less likely a fraudster can steal it.

Red flags you’ll want to keep an eye out for include:

• Unusually large orders from new customers.
• Multiple orders in a short time.
• Mismatched billing and shipping addresses.
• International orders with high shipping costs.
• Rush or overnight shipping requests.
• Multiple declined transaction attempts.
• Orders with many of the same item.
• Suspicious email addresses.
• Orders from high-risk countries.
• IP address location differs from billing address.
• Inconsistent customer information provided.
• Use of multiple cards for one order.

If you notice such flags, cancel the transaction or delay the shipment until you can verify the customer’s information. Fraud flagging software will help automate this process. Allowing you to have more time focusing on growth for your business.

Summary: Prevent Apple Pay disputes by providing clear descriptions, good service, and secure transactions.

How Does Apple Pay Work?

First off…

Apple Pay works by using Near-field communication (NFC). It’s a technology in devices that lets it wirelessly talk to other devices or tags when they're close. Kind of like a super short-range Bluetooth. Anyway. It’s used for sharing information and making payments.

And here’s how it works:

1. Customers sign into their device with their Apple ID.
2. They open the Wallet app and add their card information—manually or by scanning it.
3. When purchasing in-store, they hold their device near the payment terminal.
   1. The NFC technology transmits payment information. 
4. They’ll click the Buy with Apple Pay button when shopping online and enter their payment information.

Apple Pay uses tokenization mixed with encryption to protect card details. This means the seller never sees the actual card number. Instead, the app uses a unique token for each transaction. Such a token masks the customer’s information and prevents data breaches from giving hackers their information.

Summary: Apple Pay uses NFC, encryption, and tokenization for secure, convenient transactions.

How Do I Fight & Win Apple Pay Disputes?

You first should know whether a dispute is worth fighting. Determine if fighting a dispute is worth it by considering the transaction amount and evidence strength.

If the cost of fighting exceeds the disputed amount, it might not be worth pursuing. Learn from each dispute and adjust your practices to prevent future issues.

To fight and win Apple Pay disputes, follow these steps:

• Gather all relevant evidence
  • This includes receipts, shipping records, and communication with the customer.
• Submit the evidence promptly: Time limits are strict.
• Ensure the evidence is organized: This helps the bank understand your case.
• Highlight any policies the customer agreed to: Return policies, terms of service, etc. 
• Communicate with the customer if possible: This can sometimes prevent chargebacks.
• Monitor disputes: Stay updated on their status and respond to any requests for more information.
• Learn from each dispute: Adjust your practices to prevent future disputes.

I wish I could tell you a secret formula to win disputes. But there is none. So long as you keep records and aren’t engaging in unethical activities, you should have a decent chance of winning.

Banks and card networks will favor the buyer in most scenarios. Thus, why prevention is better than fighting a chargeback dispute.

Summary: Fight and win Apple Pay disputes by gathering evidence, responding quickly, and learning from outcomes.

FAQs

How Do I File a Dispute With my Apple Card?

On an iPhone, go into your Wallet app, tap on your Apple Card, select the transaction you want to dispute, and then tap Report an Issue. On an iPad, open your Settings and tap Wallet & Apple Pay to find your transactions. Provide the information they request and wait for Goldman Sachs to review your issue.

Conclusion

Despite not having much data, Apple Pay does show promise in reducing chargebacks with its security protocols. You’ll still encounter disputes and chargebacks, but maybe fewer.

Another way to reduce disputes is to use chargeback alerts. These alerts help you address issues before they escalate to chargebacks. We partner with major providers like RDR to offer such alerts.

Learn how we can help.

Sources

• [1] Payne, J. (2023, March 5). Lenders Fight Back Against Chargebacks with Apple Pay.
• [2] Midigator. (2023). Chargeback Report Statistics.
• [3] Reddit. (2019, July 1). Apple Card Dispute Time Limit.
• [4] Apple Support. (2024). How to Report a Transaction Issue or Dispute a Charge to Your Apple Card.