The wind of change is in the air as VISA started rolling out its new claim resolution initiative (VCR). The improved procedure is already live in Hong Kong and New Zealand since October 2017. Rest of the world will follow in mid-April 2018.
Why is the Resolution Process changed?
To make the resolution process more efficient, just for all parties involved, and more transparent.
The changes in the the chargeback sphere have drastic impact on merchants that are coping with an ongoing increase in fraud and authorization related chargebacks, while some of the filed cases are wrongful, e.g. refunded transactions or 3d secure transactions. New VCR process is designed to prevent invalid chargeback cases from entering the system.
How will VCR improve the existing process?
By preventing biased chargebacks, which are estimated at approximately 14% of total CB volume
The Issuer is required to make a thorough inspection of the case prior to filing a chargeback, this will include review of associated transactions (credits, reversals, and adjustments), AVS, and 3d results
By cancelling chargeback reason code 75 (unrecognized transaction) and introducing Merchant Purchase Inquiry (VMPI) process to enable merchants to respond to cardholder information request prior to the chargeback initiation
By enhancing automation of the dispute process lead by the increase in the role of VROL system
The chargebacks will be split into 2 major streams: Allocation and Collaboration, each stream will have a different handling procedure. The issuers will use the VROL automated form that will guide them to categorize each chargeback case in a proper and unified manner.
By grouping the Chargebacks into four groups: Fraud, Authorization, Processing Errors, & Consumer Disputes to allow clearer handling procedure for each respective group
By reducing merchant response time from 45 to 30 days and overall resolution time from 150 to 70/100 days (depending on the stream)
By reducing maximum number of fraudulent chargebacks per card to 35 within a 120-day period for Card Not Present transactions
By blocking chargebacks for transactions processed after the date of the first chargeback or fraud report for the same account
VCR initiative is meant to break the existing pattern of shifting the liability from card holders and issuers onto merchants, in this new scheme all sides will have to take action in order to prevent an unnecessary chargeback. All the involved parties will be monitored and scored upon their performance and compliance to the program’s rules, any positive or negative case will impact participant’s “index”; if thresholds are breached VISA may issue a notification and urge the participant to take action to improve the score.
Visa Claim Resolution initiative should save merchants time and money spent handling unnecessary chargeback cases and, of course, eliminate the chargeback handling fees for those cases. However, in order to benefit from this program merchants should be prepared to handle their Chargebacks quickly and provide sufficient documentation from the get-go.
In our next post we’ll discuss in more detail the new chargeback reason codes, the allocations and collaboration processes, the understanding of those will allow you to prepare for the upcoming changes.