One thing you can always expect in e-commerce is change. As technology has become more sophisticated, so has the way in which people shop and how they pay. When you accept a transaction online, you’re attempting to verify that the card does, in fact, belong to the customer and all information is accurate. Unfortunately, chargebacks happen, and they aren’t always deliberate fraud. In fact, about 86% of chargebacks are the result of friendly fraud. These, in addition to all the other types, are only increasing the losses, which are expected to climb to $7.2 billion by 2020.
Any changes to chargeback policies can create havoc, especially if they seem unclear. That’s the concern with the new Visa Claims Resolution (VCR), which officially launched April 15.
This new process completely changes most of the rules associated with how and when disputes find resolution. Merchants, like e-commerce sellers, already must deal with many regulations simply for being a card-not-present vendor. Not to mention, the challenges of working with payment processors that don’t remove much of the margins. Visa, however, believes the overhaul will offer better clarity and reduce the amount of time in which chargebacks are resolved.
VCR is actually a product of artificial intelligence and machine learning. It’s an automated, data-driven, and global system. The answer to a better process is to drive efficiency, which Visa is doing in their new Visa Resolve Online (VROL). VROL will automate the tedious process, eliminating as many invalid disputes as possible up front. These alone should reduce chargeback quantity as Visa states they are currently at as much as 15% of their volume.
The system is also expected to have a much shorter response window than what currently exists. Currently, your response is due within 45 days; it will now shorten to 30 days. Eventually, depending on data trends, this may decrease again to 20 days. Shorter can be better in many ways; it just means you’ve got to become aware of an issue and respond. Consider an automated responder for these if you don’t have one.
The simplification of the process continues with reducing the number of chargeback reason codes. Right now, there are an astounding 22 codes—this will go down to just four. The four will be for:
Within these categories, there are then subsets that clearly define the reason.
Automation delivers a seamless process. When using the VROL system, there are two categories to choose from, allocation or collaboration. For chargebacks that are identified as “Fraud” or “Authorization,” VROL will make an auto-determination before notifying the merchant of the dispute. If this occurs, Visa will only reverse the decision for three reasons:
With automation, these are black and white rules with no gray. It’s intended to reduce the extra work that all parties experience. Merchants can still respond to chargebacks in the allocation discipline if they don’t meet the other three reasons:
At this point, the categories of “Processing Errors” and “Consumer Disputes” will be reviewed. To get to this point, issuers, who must comply with filing a chargeback, must complete a questionnaire and provide the required information. This again is intended to reduce the back and forth and move the process along.
The VCR affects both card-present and CNP merchants. To reduce friendly fraud, Visa will now limit 35 CNP fraud disputers per account number for a 120-day period. If the account is not closed, which sometimes occurs in fraud chargebacks, and a new fraud chargeback is filed, the system will prevent the filing of a new chargeback on that account.
One possible advantage in the area of saving time and resources, merchants may qualify to bundle responses related to a series of transactions for one account and Merchant ID. Just type in the responses once, and the data will be replicated for the others.
Since this change has just been made, it’s too early to see how this technology will impact the industry. For additional resources on the changes, visit the Visa Business School site. You can also review the Pinpoint Chargeback Management program to simplify all your e-commerce chargeback challenges.