Visa Chargeback Regulation Changes — April 2018
Visa is making changes to its current dispute process and their new initiative will go into effect in April 2018. What are the main changes and how it will affect merchants?
New Visa global dispute resolution process — Visa Claims Resolution (VCR) is made to simplify the dispute process by reducing time and costs associated with it. It’s been many years without any significant changes, so it’s time to standardize disputes. And, as you may know, card network regulations are important for chargeback policy.
The Main Changes
As the aim of making this shift is improving the process for handling chargebacks, the existing 22 reason codes will be grouped under four dispute categories, such as:
New categories are expected to simplify and organize the process and provide merchants with more accurate and effective information.
Another one is a timeframe change, which means that the time for a response to the initial dispute will be reduced from 45 to 30 days (in 2019 Visa may shorten it to 20 days). What’s more, currently the resolution can take up to 150 days to be completed through the arbitration process, but with the new rules, it will be 31-70 days for Authorization and Fraud categories, and 31-100 days for Customer Disputes and Processing Errors.
Also read: How to win a chargeback dispute
As Visa reported, on average chargebacks take 46 days to resolve, so it’s a long process for merchants. Bearing this in mind, VCR was created to make it less painful, cut down the number of chargebacks that merchants receive, and removing invalid disputes from the system.
There’s also a new fraud dispute time limit for e-commerce related transactions. Issuers may dispute a maximum of 35 transactions within a 120-day timeframe and once the 35 is hit, Visa will not allow any more disputes to be processed.
What’s more, chargeback reason code 75 for ‘Transaction Not Recognized’, one of the most widely used, will be eliminated. Issuers need to leverage the data from the Visa portal to assist the cardholder to recognize the transaction. New dispute categories are meant to streamline the entire process as much that this code will no longer be needed.
Keeping in mind that the new rules are supposed to reduce the overall chargeback process to the bare minimum, there will be two dispute workflows.
All disputes will be sent through an Allocation or Collaboration workflow to automate the process as much as possible. The first one is made mostly for fraud and authorization disputes, with automated checks, while Collaboration workflow is based on the existing Visa chargeback process where issuers, merchants, and acquirers work together to resolve the dispute.
Let’s dive a bit deeper into these two new workflows.
There are two dispute types assigned to this workflow: Fraud and Authorization.
Under Allocation, Visa performs a series of automated checks on the dispute to find out whether the disputed transaction is 3D Secure verified, if the transaction has already been refunded, or if the purchase was disputed after the allotted time frame.
When any of mentioned scenarios will be detected, Visa will block the dispute. The goal is to reduce the number of valid chargebacks.
What if the dispute will pass through the automated workflow? In this case, the liability will be assigned to the merchant, so the merchant response is only allowed when they can definitely prove that fraud or authorization chargeback is invalid.
The Collaboration workflow will cover Processing Errors and Consumer Disputes.
According to Visa, the majority of disputes will go through the Allocation workflow, but still, there will be disputes that will require interaction between parties involved — merchants, acquirers, and issuers.
The entire process under this workflow will be similar to one known today. What will change is that issuers will have to complete a more detailed form than the current one. The main goal is not only reducing the overall chargeback timeframe, but also simplify communication between involved players that will cause accurately and timely response.
The new chargeback resolution model will impact all parties involved in payments, such as issuers and acquirers, but also merchants and payment processors. To sum up, here are the major changes it will bring for merchants:
Just to let you know, SecurionPay platform is ready for these new rules. From April 2018, it will be applied to all incoming Visa disputes and will be available for all our merchants receiving Visa chargebacks.
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