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Visa Claims Resolution (VCR), the new Visa chargeback process came into effect as of 15 April 2018, All disputes will be processed through the VCR and it will be moderated by Visa’s automated tool, Visa Resolve Online (VROL).

Feel free to read this article carefully as it explains how VCR will affect your business.

So What is VCR all About?

The number of card transaction disputes is on the increase and as a result, so are processing time and costs. Consumers are becoming a lot more savvy and understand chargebacks and therefore abuse this facility and therefore merchants are experiencing higher levels of fraudulent disputes.

Visa found that it takes on average about 46 days to resolve a chargeback, sometimes it’ll take more than 100 days to resolve a dispute. A lot of money was being burned in this process and not just their money, but money that belonged to merchants, processors and ecommerce platforms and this is why Visa created the VCR. It was designed to reduce time, cost, and the number of chargebacks being processed.

Visa Claims Resolution (VCR) initiative, designed to streamline and simplify the current Visa chargeback flow. The VCR initiative will restructure the dispute process from a litigation-based approach to a liability assignment process.

The enhanced dispute process proactively eliminates invalid disputes and responses. VCR applies automated liability assignment wherever possible, creating a more efficient process by simplifying rules, developing a user-guided workflow and reducing dispute resolution timeframes.

Apart from providing cardholders with a better experience, VCR benefits merchants through decreased dispute resolution times. This is possible as the Visa system will automatically preventing invalid disputes from being raised from the Issuing banks.

How it Works

Four groups of chargeback reason codes will be introduced: Fraud, Authorisation, Processing Error and Consumer Disputes. The concept of business process flows is also being introduced. There will be 2 VCR Business process flows as follows:

1. Allocation

Fraud- and Authorization-related chargebacks would fall into the allocation bucket. Disputes that are managed under this category will be automatically processed by Visa, allowing them to reject disputes that don’t follow certain guidelines. These automated checks performed by Visa will look to answer the following questions:

  • Was the dispute initiated within the allowed timeframe?
  • Was the fraud dispute a 3D Secure-authorized transaction?
  • Has the transaction been refunded?

If a dispute meets any of these criteria it can be blocked by Visa, preventing it from becoming a chargeback. This flow is expected to result in fewer invalid chargebacks. On the other hand, if the dispute is not deemed as invalid, Visa will assign liability to the merchant. Successfully defending these chargebacks will only be possible if you can definitively prove that the chargeback is invalid by providing compelling evidence. More on that later.

Visa anticipates as many as 60-80% of disputes will fall into the allocation bucket (fraud/not authorized). In this workflow, allocation dispute outcomes will be determined by CVV, AVS, and 3D Secure responses. If these tools are not enabled on your account, you will be liable for these disputes.

With this in mind, it also means there could potentially be an increase in fraud-to-sales ratios. In addition to monitoring chargebacks, the card associations also monitor reported fraud transactions with the Visa Fraud Monitoring Program (VFMP).  Visa is sunsetting dispute reason code 75 (Unrecognized), which was a reason code previously not considered fraud. With the VCR change, those “unrecognized” disputes will be placed into the fraud category which could impact fraud-to-sales ratios.

2. Collaboration

Collaboration will involve the same process as it does today, but is specifically associated with non-fraud related dispute reason codes. It requires interaction between merchants, processors, and issuing banks, but does not require compelling evidence to remedy the case.

The VCR initiative will help streamline the communication flow for collaboration disputes.

Timeframes

The resolution timeline will be significantly reduced. The process currently takes an average of 46-105 days, depending on the complexity of the case

With VCR, industry members can expect:

  • 31-70 days for fraud and authorisation chargebacks
  • 31-100 days for customer disputes and processing error chargebacks

 

Notifications

The dispute notifications sent out to you will contain all necessary instructions according to the chargeback type and its relevant process. Please read the dispute notifications carefully as they contain important instructions on how to proceed in subsequent stages of the chargeback cycle.

Consolidating Reason Codes

Visa will consolidate 22 chargeback reason codes into 4 dispute groups.

Fraud Authorisation Processing Errors Consumer Disputes
62 – Counterfeit Transactions 70 – Card Recovery Bulletin or Exception File 74 – Late Presentment 41 – Cancelled Recurring Transactions
57 – Fraudulent Multiple Transactions 71 – Declined Authorisation 76 – Incorrect Currency or Transaction Code or Domestic Transaction Processing Violation 53 – Not as Described or Defective Merchandise
81 – Fraud – Card-Present Environment 72 – No Authorisation 77 – Non-Matching Account Number 85 – Credit Not Processed
83 – Fraud – Card-Absent Environment 73 – Expired Card 80 – Incorrect Transaction Amount or Account Number 30 – Services Not Provided or Merchandise Not Received
93 – Merchant Fraud Performance Programme 78 – Service Code Violation 82 – Duplicate Processing 90 – Non-Receipt of Cash or Load Transaction Value at ATM
86 – Paid by other Means

What can these changes potentially mean for merchants?

  • Quicker turnaround time on disputes
  • Fewer cases to juggle
  • Simplified reason codes
  • Stricter rules around compelling evidence
  • Reduced chargeback %

How can merchants prepare?

  • Standardize your documentation processes and familiarize yourself with compelling evidence requirements
  • Promptly review and organize evidence needed to respond to disputes by the deadline
  • Be proactive with chargeback and fraud mitigation
    • Review and implement fraud tools (AVS, CVV, Advanced Fraud Tools, and 3D Secure)
    • Update billing descriptors so that cardholders can easily identify the charge
    • Review and modify customer service practices as necessary to improve customer experience
  • Promptly issue refunds

I hope this post was helpful. If you need further assistance then feel free to conact We Tranxact on 0121 792 5367 or support@wetranxact.co.uk