We feel Visa’s new chargeback handling scheme is going to create a more interdependent relationship among high risk credit card processors, merchants and acquiring banks. With the way the Visa Claims Resolution is structured, which went live last week, the three entities are going to need to depend on one another to mitigate chargebacks and keep rates low.
Visa’s two-pronged model to handle chargeback disputes is encouraging merchants to supply compelling evidence: information merchants can use to support them in proving that the chargeback is either fraudulent or unjust. It may sound like an arduous process — it causes merchants to now adapt to playing detective — but with the help of high risk credit card processors and acquiring banks, perhaps not so much.
In defending themselves against chargebacks, merchants should no longer feel alone.
Examples of compelling evidence
- Communication: Merchants can turn to several examples here, such as a phone log detailing the time of a conversation with a customer. E-mails also present strong evidence, as does a chat transcript or, more so, a signed contract.
- Social media posts: Surprisingly, social media has emerged as a popular tool for merchants to consult to prove a case of friendly fraud (when a customer makes an online purchase, but claims it was never received). Criminals seem to enjoy posing with their ill-gotten goods online. Thus, it is time well spent to check a customer’s social media accounts – Instagram, Facebook and Twitter are reportedly the most effective – for photos and mentions of purchases.
- Proof of delivery: We advocate merchants partnering with a reputable shipping company, such as U.S. Postal Service, FedEx, DHL or UPS. Shipping receipts (which the customer has signed) present very strong proof as do sales receipts.
- Customer data: IP addresses and geolocation are excellent tools not just for compelling evidence after a sale, but for being proactive before the sale, when a purchase to an area doesn’t make sense. Use of a CVV code – which validates that the cardholder is legitimate – during a purchase is also strong evidence.
- A naughty list: It is good to maintain records of customers – and sharing them – who have a history of unscrupulous activity: friendly fraud or excessive chargebacks and returns.
- Random pieces: Back in 2015, Visa announced it would accept flight manifests as evidence in airline friendly fraud cases. Bogus chargebacks are also rife in the online dating industry; thus, screen shots of active online profiles are strong bits of proof.
How compelling evidence fits into Visa’s ‘Allocation’ model
The very first step of the allocation model has Visa – through automation – deciding whether a chargeback is valid. In this step, it is taking all of the facts and evidence that it has and making a ruling whether or not the dispute should go forward. This is where high risk credit card processors can introduce examples of compelling evidence with the goal of convincing Visa’s system that the consumer is wrongly/falsely filing a chargeback dispute.
If the merchant is unable to gather evidence for the beginning stage, it can introduce proof in the pre-arbitration and arbitration stages, should the dispute advance that far.
Compelling evidence with the ‘Collaboration’ model
The unique purpose of the collaboration model is to have all parties involved in the dispute – the credit card issuing bank and consumer, and the acquiring bank, high risk credit card processor and merchant – communicate and share all pertinent information through the Visa Reserve Online Portal (VROL). The collaboration approach is similar to the legacy (pre-April 15) model; however, the goal is all parties working together for a reasonably quick common resolution.
High risk credit card processors need to coach
Over the last two years in a series of steps, Visa has reiterated its disdain for chargebacks, and the industries which suffer them. Though high risk credit card processors are indirectly affected from Visa’s new system, they have everything to gain by keeping their merchants processing transactions as consistently and friction-free as possible.
If nothing else, the Visa Claims Resolution is going to make merchants better at what they do.
How has your business prepared for the Visa Claims Resolution? Leave us a comment below.