In the fast-growing world of digital finance, one of the most complex and often misunderstood mechanisms is the chargeback system — the process through which a customer disputes a transaction and requests a reversal from their bank or payment provider.
In Tanzania, chargebacks are becoming increasingly relevant with the rise of mobile money, online payments, and fintech integrations. Yet, many legal practitioners and even adjudicators are still unfamiliar with how they work, and what legal and economic implications they carry.
The Legal Framework Governing Chargebacks in Tanzania
Internally, chargebacks operate under a combination of financial, banking, and consumer protection laws, including:
The Bank of Tanzania Act [Cap 197 R.E. 2022] – empowers the BoT to regulate payment systems and financial stability.
The National Payment Systems Act, 2015 and its Regulations of 2015 & 2021 – provide the foundation for payment system oversight, including rules on dispute resolution and transaction reversals.
The Electronic Transactions Act, 2015 – governs digital contracts, electronic transfers, and online fraud prevention.
The Consumer Protection Regulations (Banking and Financial Services) – ensure customers have a mechanism for redress when transactions are unauthorized or disputed.
Mobile Payment System Guidelines (BoT) – regulate interoperability, reversals, and customer complaints between mobile operators and financial institutions.
These laws collectively define how chargebacks are processed, the timelines for lodging disputes, and the duties of payment service providers to investigate and respond.
How Chargebacks Operate in Practice
When a consumer disputes a transaction — say, a double deduction, an unauthorized payment, or a failure to receive goods — they may request a reversal through their issuing bank or mobile wallet provider.
The institution then engages the acquiring bank or merchant’s provider to verify and resolve the claim. If valid, the funds are reversed and the merchant bears the cost.
This process protects consumers but can also be abused, causing massive losses to fintech operators and merchants through fraudulent chargeback claims. Hence, the need for both technical and legal balance in adjudicating these disputes.
Why Judges and Magistrates Must Understand Chargebacks
Fintech-related cases are rapidly entering Tanzanian courts. Judges and magistrates are now called to interpret contracts, assess digital evidence, and balance the rights of consumers and fintech firms in complex transaction reversals.
A solid grasp of chargeback mechanisms enables judicial officers to:
Distinguish between legitimate reversals and fraudulent claims.
Protect both consumer confidence and merchant integrity.
Strengthen financial sector stability by ensuring predictable rulings.
Support innovation and trust in Tanzania’s digital economy.
The Bigger Picture: Safeguarding Tanzania’s Digital Economy
Chargebacks are not just financial transactions — they are economic safeguards. If mismanaged or misunderstood, they can lead to loss of investor confidence, discourage e-commerce, and undermine the digital transformation Tanzania is pursuing.
Understanding chargebacks allows our courts, regulators, and fintech players to build a resilient, fair, and secure financial ecosystem — one where innovation thrives under the rule of law.