Changes to Visa’s Chargeback Policy

Chargebacks have long been the bane of the high-risk merchant’s existence. Battling ratios and handling disputes can be time-consuming and frustrating, not to mention expensive. In fact, The Nilson Report forecasts a record $31 Billion in chargeback losses by 2020. Visa hopes to change that with their new Visa Claims Resolution (VCR) initiative.

“With the number of disputes rising, and processing time and costs increasing, Visa is excited to introduce the Visa Claims Resolution(VCR) initiative,” Visa explains in it’s Visa Claims Resolution document. “To improve the efficiency of handling disputes, Visa is focused on automating and simplifying the dispute-resolution process while also keeping pace with the needs of the payment industry. “

In short, the new initiative brings four major changes to it’s dispute resolution process which aims to change the process from a litigation-based model to a liability assessment model.

The Major Changes

‘Reason Codes’

One of the biggest changes comes in Visa’s ‘reason codes’ chargeback categorization. Until recently, disputes fell into one of 22 reason codes. Visa has reduced that to 4 main groups:

• Fraud
• Authorization
• Processing Errors
• Consumer Disputes

Of particular note, the most often used reason code “transaction not recognized” has now been eliminated. Card issuers will need to work with cardholders to identify the transaction before they file a dispute.

Chargeback Limits

Next, Visa will only allow issuers 35 e-commerce fraudchargebacks from the same cardwithin 120 days.  That’s down from the 45 days allowed before the new policy. Once that limit is reached, Visa will not allow any further disputes from that particular card.

Reduced Timeframe for Disputes

Before April, merchants had 45 days to respond initiallyto disputes. The new rules shorten that timeframe to 30 days and will, be further reduced to 20 in 2019. Further, disputes must be resolved within 31-70 days for fraud and authorization disputes and 31 to 100 days for processing errors and customer disputes.

 

Dispute Workflows

In line with the goal of reducing the time involved in the overall chargeback process, all disputes will be routed through an Allocation or Collaboration workflow.

The Allocation Workflow

The Allocation Workflow handles the dispute types Fraud and Authorization and performs automated checks to determine if the transaction is 3D Secure verified, whether the transaction was refunded or if the dispute was filed within the allotted time. If the dispute passes the automated process, the merchant is responsible for the chargeback and only will be permitted to defend in certain circumstances, and only when they can provide definitive proof the that the chargeback in invalid.

 

The Collaboration Workflow

Visa acknowledges that some chargebacks will need some interaction between merchants, acquirers and card issuers. Those claims now fall into the Collaboration Workflow, and follow the normal Visa chargeback process.

 

If you have questions about the changes imposed by Visa, feel free to contact the friendly team at MobiusPay and we’ll be happy to take you through the changes and how they may impact you.

 

If you’d like to learn more, you can turn to Visa for the following resources:

New Visa Claims Resolution document: https://www.visabusinessschool.com/en/course/36420293-afe1-4b21-98d0-525f1b56ca65

Visa Business School short course on ‘Understanding Visa Claims Resolution (VCR): https://www.visabusinessschool.com/en/course/36420293-afe1-4b21-98d0-525f1b56ca65

If you’re really ambitious, you can take a look at the 1,031-page ‘Visa Core Rules and Visa Product and Service Rules (updated April 14, 2018) https://usa.visa.com/dam/VCOM/download/about-visa/visa-rules-public.pdf

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