In our previous post we have outlined the core changes that come with the new VCR initiative. Now we’d like to discuss in detail the modifications that will influence the way merchants will handle their chargebacks.
The first thing to mention to avoid any possible confusion is the changes in the terminology, in VCR a Chargeback will be called a Dispute, and Chargeback Representment will be called a Dispute Response.
The current 22 reason codes were reviewed and re-arranged to fit into 4 groups: Fraud, Authorization, Processing Error, and Consumer Disputes. The dispute should be handled according to workflow suitable for it’s group, the Fraud and Authorization cases will be following the Allocation workflow, while Processing and Consumer Disputes will be following the Collaboration workflow.
How will Allocation process work?
Allocation workflow is an automated process for Fraud and Authorization related disputes. Before such dispute will be issued the issuer will have to complete a step-by-step verification process via VROL ( Visa Resolve Online) system. Visa will perform automated checks for dispute time thresholds, VBV authorization, related refunds, and existing F2S reports (for previous transactions related to the same merchant), shall the case fall on any of these filters it will be rejected as invalid.
A valid dispute will automatically be assigned to the merchant, a dispute response will be accepted for Pre-Arbitration only when the merchant can provide compelling evidence that meets the criteria. Merchant and Acquirer have 30 days to send a dispute response, Issuer (card holder’s bank) has additional 30 days to review the received documentation and respond to Pre-Arbitration by either accepting or declining the case. If the dispute is accepted (case won), the merchant will be credited with the chargeback amount. If the dispute is declined, no further case defense will be accepted.
How will Collaboration process work?
Collaboration workflow is the process designed to handle disputes labeled as Processing Errors and Consumer Disputes. There will be no major change in the collaboration dispute defense process; as indicated by its name, collaboration will require a joined effort from Issuer, Acquirer, and the Merchant in order to resolve the case. VROL questionnaire was improved and requires more detailed information about the case from the Issuer. Similar to the Allocation process, there will be only one Pre-Arbitration allowed per case.
For collaboration process the time frame will be reduced from 45 to 30 days.
How should merchants prepare for the upcoming changes?
The aim of the new VCR initiative is to declutter the dispute process and make it more efficient. The changes will require fast and precise response on all the sides, the merchants should consider automation of the dispute process in order to reduce the response time. Depending on merchant’s chargeback volume, workforce, and development resources either an in-house handling module or an outsourced system could provide the desired and best fitted solution. PaymentsOp will be happy to assist merchants in finding the optimal solution for their business model.
As mentioned above, only one pre-Arbitration will be allowed, hence, the evidence provided with the case should be reviewed with care and checked against the compelling evidence checklist. It is highly advised to use VBV for as many transactions as possible, perform KYC procedures to obtain user’s profile, issue refunds in a timely manner and link them to the ARN of the original transaction to enable VISA to track these associated transactions.
Merchants should keep in touch with their card payment service providers in order to establish a well organized procedure for dispute handling.