New Visa chargeback rules are ‘good news’ for merchants

Chargeback allows cardholders to claim a refund from their card issuer (within set criteria and a specific timeframe). It’s given consumers decades of protection but spawned friendly fraud, especially in cardholder, not present (CNP) digital and mobile channels.

70% of all credit card fraud is through false disputes, and friendly fraud is increasing by over 40% every two years[i]. In 2020, it cost the industry over £100 billion (US$132 billion), not including additional losses that merchants had to absorb[ii].  These can add up to more than twice the original transaction amount[iii].

And the damage doesn’t stop there; it also increases a merchant’s chargeback ratio, which, in extreme cases, can result in the termination of their merchant account.

New rules aim to cut the dispute burden

From 15 April 2023, for global Visa disputes submitted under the 10.4 Visa reason code, sellers will be allowed to submit specific, compelling evidence to prevent the issuer from proceeding with submitting a dispute. This includes:

• Data showing that merchandise or services were provided
• The same Payment Credential (i.e., card) was used in 2 previous transactions that the issuer had not reported Fraud Activity to Visa, and these transactions were processed more than 120 days before the Dispute Processing Date
• The device ID, device fingerprint, or IP address are identical to the undisputed transactions
• Additionally, one or more of the following for the undisputed Transactions, demonstrating they are the same data points as the disputed transaction:
  • Customer account/login ID
  • Delivery address
  • Device ID/device fingerprint
  • IP address

If the above evidence is provided, the issuer will not be allowed to continue processing the dispute. This aims to reduce pre- and post-dispute processing costs and to equitably assign the “burden of proof” to the participating parties in the dispute lifecycle.

Taking a proactive approach to the dispute resolution

These changes can’t come soon enough. A recent study shows that nearly one in five consumers who filed a chargeback dispute have committed friendly fraud by submitting false claims to get their money back on legitimate purchases[iv].

Visa has been striving to tackle this for some time. To help merchants get a better handle on chargebacks, it created the Rapid Dispute Resolution (RDR) service – an automated dispute resolution tool available as an option to all Visa merchants.

Stopping chargebacks becoming a crisis

RDR is driven by a robust decision engine and offers a quick way to solve chargebacks before they turn into disputes.

At TrustPay, we can help you to integrate RDR and optimise existing and new rules, so you can minimise your chargeback ratio without compromising your customer experience.

We also help you to monitor risk actively and take steps to reduce chargebacks, for example, by limiting the number and amount of transactions in the problematic region/from problematic users.

What next?

While there’s no single silver bullet that will remove the full burden of chargeback and misuse, there is growing momentum to tackle misuse, lessen costs and make life much easier for merchants.

Working in tandem, card networks, and acquirers can help to minimise the risk and still safeguard the interests of genuine customers – which is good news for everyone (except fraudsters).

Get in touch with our team at sales@trustpay.eu  or contact your account manager to learn more.

[i] https://www.fisglobal.com/en/insights/merchant-solutions-worldpay/article/chargebacks-tackling-the-hidden-impact-on-pandemic-payments

[ii] https://www.fisglobal.com/en/insights/merchant-solutions-worldpay/article/chargebacks-tackling-the-hidden-impact-on-pandemic-payments

[iii] https://www.chargebackgurus.com/blog/friendly-fraud-its-a-family-affair

[iv] https://www.digitaltransactions.net/rising-attack-rates-show-how-fraudsters-are-zeroing-in-on-fintechs-according-to-sift-data/