Visa issued new rules regarding chargebacks on April 15, 2018. This new program is called Visa Claims Resolution or VCR.
It’s no surprise that many high-risk merchants face a constant stream of chargeback disputes throughout the lifetime of their online business. High-risk merchant account owners know this is based on customer behavior, not actual business practices. However, recent changes made to Visa’s Visa Claims Resolution (VCR) make it simpler to deal with credit card fraud.
What is VCR?
There is no doubt that VCR is challenging for business owners. Implemented to protect credit card customers from liability for fraudulent charges, it puts pressure on merchants to resolve disputes. You are penalized through deducted fees from your account until the dispute is resolved, even if you can prove the transaction was not fraudulent.
VCR allows customers several options under which to claim fraudulent charges. Visa investigates each claim, beginning with you, the merchant. After you respond to their request for documentation, it can take up to 90 days for Visa Claims Resolution to resolve the matter and return the funds to your account.
Changes to Chargeback Disputes
On April 15, 2018, Visa implemented changes to VCR that will benefit merchants. Moving forward, about 14% of total credit card fraud claims will not go to merchants. Chargebacks are no longer allowed for claims without supporting data.
More safeguards are put in place to confirm the credibility of a claim before money is transferred. The bank must confirm any related transactions. If you already refunded the customer for the transaction, the claim would be dismissed. If a chargeback is initiated, you will be notified in advance to avoid those surprise reductions from your account balance.
Chargeback disputes now fall into one of four categories:
- Processing Errors; and
- Customer Disputes
Disputes in the first two categories will be automatically processed and sent to the merchant for response, while the last two have more streamlined processes in the new VCR system.
Risks to Online Business Owners
Credit card fraud is always a risk in ecommerce, but it is especially serious for online businesses in high-risk industries. By automating parts of the dispute process, Visa is putting more responsibility on merchants to prevent fraud at the point-of-sale stage.
Given Visa will not allow certain chargebacks to be disputed by vendors, there may be a higher fraud-to-sale ratio, which could jeopardize merchant accounts. Visa is eliminating the “unrecognized transaction” error. Now, these will be in the “fraud” reason code category. Visa will allow less time for merchants to respond to disputes, which could also put your account at risk should a response go unreceived in a timely manner. less time for merchants to reply to disputes which could also put your account at risk should a response go unreceived in a timely manner.
Using 3D Secure in the VCR Process
A high-risk merchant operating an online store should definitely have a solid fraud detection system. Adding velocity checks as well as a transaction fraud-scoring tool are good methods to block fraudulent sales. In addition, there’s evidence 3D Secure lowers fraud-to-purchase ratios by stopping fraudulent purchases before they jeopardize your high-risk merchant account. In addition, a customer can rarely dispute a transaction processed with 3D secure. Although adding this step to your checkout process might lead to lower conversions. DirectPayNet can help you minimize the conversion loss by adding fraud screening tools.
The 3D Secure system creates a cooperation among the merchant, the bank and the credit card company resulting in an innovative fraud detection setup available for online businesses. The benefits include:
- shifting liability for a credit card transaction from the merchant to the card issuing bank;
- a reduction in the number of chargeback disputes, because the risk of fraud is much lower;
- money savings in processing fewer chargeback disputes; and
- no or minimal additional cost for using 3D Secure
Visa is making disputing chargebacks easier for merchants, and that’s good news. It should take less time to process claims and false ones will not affect you. However, online merchants must still take steps to defend themselves from fraudulent orders.
Are you losing precious revenue from chargebacks? Set up a call with DirectPayNet to speak with seasoned experts that will help lower your chargebacks and respond effectively to get your funds back.