We don’t mean to damper holiday celebrations, but merchants only have nine days until the new Visa Chargeback Monitoring Program takes effect.
Visa announced earlier this year that it was modifying its chargeback monitoring program effective Jan. 1, 2016. The changes are going to force merchants, particularly those in high risk industries, to re-think their chargeback strategies. The new rules signify Visa is being less tolerant.
Chargebacks can no longer be considered another cost of doing business, particularly for high risk merchants.
3 Big Changes Merchants Need to be Ready For
For the Visa Chargeback Monitoring Program, there are several changes, each unique.
- Most important, domestic chargeback rates go from 2 percent of sales or 200 chargebacks per month to 1 percent/100 per month – a significant change.
- When a domestic merchant approaches the 1 percent/100 threshold, Visa will notify the merchant’s acquiring bank, which will notify the merchant and remain on watch.
- When a merchant exceeds thresholds, the acquiring bank is responsible for contacting the merchant and implementing a scheme to lower chargeback rates over a period of five months.
Visa Taking on Fraud
In April, Instabill copywriters blogged about a study which claimed 86 percent of chargebacks are the byproduct of friendly fraud.
Visa is taking action by also revising its Fraud Monitoring Program. After Jan. 1, the Visa’s fraud level is set at $75,000 (up from $25,000) with the fraud-sales ratio dropping to 1 percent. Visa will issue a warning to merchants acquiring banks at $50,000 or 0.75 percent.
‘Merchants have to become more responsible’
Instabill processes credit card transactions for many high risk industries such as nutraceuticals, membership/subscription sites, tech support and travel. We believe these industries will be among the most affected by the Visa chargeback monitoring program.
“I think merchants with high chargeback rates simply have to become more responsible business owners,” said Wendy Jacques, Sales Manager at Instabill. “It is going to be a lot easier to get shut down.”
Additionally, said Ms. Jacques, payment methods such as recurring billing and free trials could become less common. “Those are where the largest amount of chargebacks come from,” she noted.
4 Things Merchants Can Do
There are, however, several things merchants can do:
- Merchants whose chargeback rates consistently near or exceed the new thresholds may want to hire a third-party service that mitigates chargebacks, such as Chargeback911.com or Chargeback.com. “Visa’s changes are great news for companies that assist businesses in curbing chargebacks,” said Ms. Jacques.
- Our satellite website, Instabill.org, is a free online guide on mitigating chargebacks. It not only explains the chargeback process from the merchant’s side, but also the consumer’s side to enable full understanding.
- We’ve preached the importance of an optimized billing descriptor, prominent return policy and asking for the MCC code in a sale, ad nauseum. There are many little tasks that can make a huge difference. Here are some samples:
- Finally, educate you consumers why a refund is better than a chargeback. List it on your return policy. A consumer filing a chargeback is often a kneejerk reaction to finding a product unsatisfactory. Consumers, on the whole, are more receptive to making a return if educated about it.