With the Visa Claims Resolution in full effect, credit card payment processing merchants have no choice but to become better communicators.
Earlier this week we blogged about the ‘allocation’ process – half of Visa’s new dual workflow approach to resolving chargebacks (which Visa now calls ‘disputes’), effective April 15, in which Visa initially decides whether the chargeback is valid and then assigns liability. Visa officials are hopeful that the allocation approach eliminates 14 percent of chargebacks that advance to the arbitration stage. Visa is expecting 60 to 80 percent of disputes to be resolved by this model.
The other half of Visa’s model is called ‘collaboration,’ in which pertinent information is shared by all parties – the cardholder and issuing bank, and the merchant and acquiring bank – with the common goal of reaching a resolution. The collaboration model is similar to the legacy (pre-April 15) model in that the resolution process elicits back-and-forth communication.
Credit card processing merchants, particularly those in e-commerce and high risk, need to familiarize themselves with both the allocation and collaboration models to more effectively defend themselves against chargebacks and types of fraud.
How does Visa’s collaboration model work?
Visa’s hope with the collaboration model is to encourage communication between the credit card issuing bank representing the cardholder and the acquiring bank representing the merchant. To facilitate this, it has created a questionnaire within their Visa Reserve Online Portal (VROL), in which each party initially enters pertinent information that will help bring the dispute to an early resolution.
The issuing bank and acquiring bank can also opt to share the information electronically (through e-mail or other electronic platform).
Otherwise, the collaboration workflow is similar to the allocation model, albeit with an extra step:
- The credit card issuer, on behalf of the cardholder, issues a chargeback dispute with the acquiring bank (representing the merchant).
- Within 30 days, the acquirer either accepts or denies the dispute claim, sending the onus back to the issuer.
- The issuer either accepts or denies the acquirer’s response. In the case of a denial, the issuer notifies the acquirer of pre-arbitration within 30 days.
- The acquirer then has 30 days to respond to the issuer’s request for pre-arbitration.
- Contingent on the response from the acquirer, the issuer has 10 days to bring the matter to arbitration.
- Finally, Visa issues its ruling.
What’s different about the collaboration model?
Though the collaboration system is somewhat similar to the legacy system, credit card processing merchants should note the significant differences:
- Shorter response windows: In the legacy model, acquirers, merchants and issuing banks were given a standard of 45 days to respond to one another during chargeback claims. With both the collaboration and the allocation schemes, the response window is 30 days, with the exception of the 10-day period for the issuer or acquiring bank to decide on arbitration.
- Possible fees: While the response window remains 30 days for now, Visa has already indicated it will reduce response times to 20 days, possibly by April of 2019 (though no formal announcement has been made). Thus, responses that exceed the 20-day time frame will be subject to Visa charging fees from either party. Merchants are encouraged to discuss the possible fees prior with their acquirers.
- Liability response: There is expected to be an overt response by the merchant and acquirer – should they decide to assume liability of a chargeback – to the credit card issuing bank and merchant. In the case of such, there may be fees assessed, which acquirers may absorb on behalf of their merchants.
Proactive measures for credit card payment processing merchants
Because the majority of our credit card payment processing merchants are of the high risk brand, we see many of them hampered with chargeback disputes. We’ve long said that half the battle in preventing chargebacks is being a good communicator, and not only one-on-one with your customers, but taking proactive measures such as:
- Clear and optimized billing descriptor so that the customer easily remembers the purchase
- Easy-to-read return policy, terms and conditions on the front page of your website
- Direct contact information: phone number (preferably) and an e-mail address
Instabill has a devoted website to chargeback dispute mitigation, Instabill.org, which offers strategy and guidance from prevention to reversal for credit card processing merchants. Additionally, our high risk merchant account experts are on hand Monday through Friday at 1-800-530-2444 to offer insight on disputes and more about payment solutions.