What Is CDRN and How Does It Work?

CDRN Definition

The Cardholder Dispute Resolution Network (CDRN), operated by Verifi (a Visa company), is a solution that helps merchants address transaction disputes before they become chargebacks. When a cardholder issues a dispute, the CDRN alerts the merchant, giving them a chance to resolve the issue (such as issuing a refund or providing documentation) before the bank initiates a chargeback. This early resolution process reduces chargeback rates, improves customer satisfaction, and helps merchants maintain a healthy account status. By streamlining communication between banks and merchants, the CDRN offers a proactive and efficient approach to dispute management.

How Does CDRN Work?

The Cardholder Dispute Resolution Network (CDRN) provides a streamlined process that enables real-time communication between issuing banks and merchants. When a dispute is initiated, the merchant receives an alert and has the opportunity to respond before the dispute escalates into a chargeback. This early resolution helps reduce financial losses and preserve customer relationships. Additionally, advanced CDRN management through Verifi API allows merchants to automate and optimize this workflow by integrating CDRN alerts and responses directly into their internal systems. Below is a step-by-step overview of the typical workflow involved in the CDRN process:

• Step 1: Dispute Initiation. A cardholder contacts their issuing bank to question or challenge a transaction. This may be due to reasons such as unrecognized charges, dissatisfaction with a product or service, or non-receipt of goods.
• Step 2: Issuer Submits Dispute to CDRN. Instead of proceeding directly to the traditional chargeback process, the issuing bank submits the dispute to the CDRN platform. This submission occurs in near real-time.
• Step 3: CDRN Alerts the Merchant. The CDRN immediately notifies the merchant of the dispute. The notification includes essential details such as the transaction amount, reason for dispute, and the cardholder's concerns.
• Step 4: Merchant’s Review and Response. Upon receiving the alert, the merchant reviews the transaction and determines the appropriate course of action. The merchant has a limited window (typically 72 hours) to respond through one of the following options: — issue a refund to resolve the dispute; acknowledge the dispute and take no further action, allowing it to progress to a chargeback; or provide evidence or contact the customer to address the concern directly.
• Step 5: Resolution or Escalation. If the merchant issues a refund or the customer is otherwise satisfied, the dispute is considered resolved, and no chargeback is filed. In case the merchant does not respond or fails to resolve the issue within the time frame, the dispute escalates to a chargeback through the standard process.
• Step 6: Recordkeeping and Compliance. All dispute activity managed through CDRN is documented. This supports the merchant’s compliance with card network rules and helps in analyzing patterns to prevent future disputes.

The CDRN functions as a pre-chargeback alert system that allows merchants to respond proactively to disputes, offering them an opportunity to resolve issues before they result in financial penalties. By facilitating early communication between issuers and merchants, the network contributes to more efficient dispute management and improved customer satisfaction. You can get CDRN directly within Verifi or through MidArmor.

How Can Merchants Benefit from Using CDRN?

The Cardholder Dispute Resolution Network (CDRN) offers a proactive approach to dispute management, allowing merchants to address transaction issues before they escalate into formal chargebacks. Certainly, using such a solution has a lot of benefits for merchants, so let’s take a look at the most significant ones.

• Reduction in chargeback volume. CDRN provides merchants with an opportunity to address disputes before they convert into chargebacks, helping to significantly lower chargeback ratios and maintain a healthier payment profile.
• Preservation of revenue. By intercepting disputes early, merchants can avoid chargeback fees, transaction losses, and associated administrative costs, thereby protecting overall revenue.
• Improved dispute response time. Real-time alerts from CDRN enable merchants to act quickly, reducing the delay between dispute notification and resolution, which enhances operational efficiency.
• Enhanced customer satisfaction. Early intervention allows merchants to resolve customer issues directly, often leading to a more favorable outcome and improving long-term customer relationships.
• Simplified compliance with card network rules. CDRN helps merchants align with regulatory and procedural requirements set by card networks, thereby minimizing the risk of penalties or account restrictions.
• Protection of merchant accounts. Maintaining a low chargeback rate through proactive resolution helps merchants avoid being placed in high-risk programs or losing access to payment processing services.
• Data and insights for prevention. The platform provides access to detailed records and reporting tools, which can be used to analyze dispute trends and implement strategies to prevent future occurrences.
• Reduced operational strain. Automating the dispute process through CDRN minimizes manual intervention and reduces the workload on customer service and fraud management teams.

This structured approach not only strengthens a merchant’s ability to manage disputes but also supports broader business objectives such as risk mitigation, customer retention, and financial sustainability.

CDRN or RDR?

The Cardholder Dispute Resolution Network (CDRN) and Rapid Dispute Resolution (RDR) are both solutions offered by Verifi to help merchants manage disputes before they become chargebacks. The main difference lies in how disputes are handled — CDRN notifies merchants of disputes in real time, allowing them to respond on a case-by-case basis, while RDR resolves disputes automatically based on rules the merchant sets in advance. CDRN offers broader network coverage (Visa, Mastercard, and others), greater flexibility, and the ability to engage directly with customers. In contrast, RDR is limited to Visa and prioritizes speed and automation. For most merchants, CDRN is preferable due to its:

• Greater control over individual disputes
• Support across multiple card networks
• Opportunity to preserve customer relationships

However, RDR may suit high-volume businesses seeking:

• Immediate, hands-off resolution
• Streamlined dispute management

Merchants may benefit most by using both systems strategically, depending on their volume and customer engagement priorities, and the good news is you can get both solutions within MidArmor.