Chargebacks really haven’t changed all that much over the years. The dispute process at the beginning of 2018 was largely the same as when chargebacks were first introduced more than four decades ago. However, that’s all about to change.
Visa Claims Resolution, which goes live on April 13, 2018, brings the dispute process into the present day. But of course, such a massive overhaul creates plenty of new questions as well. We did a full rundown on VCR for the Chargebacks911® blog, but I wanted to take a minute to address a few of the most common questions retailers have about this major policy overhaul.
1. What is VCR?
Visa Claims Resolution (or VCR for short) is Visa’s new global chargeback process. VCR overhauls transaction disputes from the ground up, going from the existing litigation-based process to a liability-based one.
VCR is designed to make transaction disputes as smooth as possible. Rather than force banks and retailers to engage in time-consuming representment for each case, VCR seeks to automatically assign liability whenever possible. Representment will be reserved for more complex cases that demand closer litigation.
2. Why is Visa doing this?
Honestly, this change is long overdue. The chargeback process was designed for a pre-internet age and is poorly suited for e-commerce. Seemingly legitimate customers often use chargebacks as a tool to commit friendly fraud, rather than file legitimate disputes.
Visa Claims Resolution updates the system, promising benefits for retailers, banks and legitimate customers by simplifying disputes, speeding up resolutions and filtering out fraud. Visa predicts that its new tool will filter most fraudulent chargebacks out of the system automatically, and that all dispute cases processed using VCR should be resolved within 31 days.
3. How will the existing process change?
Visa Claims Resolution tosses out the existing Visa chargeback process and replaces it with an entirely new system. Two of the most immediate changes from a retailer’s perspective are chargeback reason codes and the Visa Resolve Online (VROL) system.
VROL essentially serves as the superstructure of VCR. It is the central means of communication between retailers, issuers and acquirers, and will be the main medium to submit data for dispute resolution.
At the same time, the dozens of existing Visa chargeback reason codes will be condensed down into four primary dispute categories:
• Authorization Error
• Processing Error
• Consumer Dispute
Fraud and authorization error disputes will be processed automatically based on a workflow that flags invalid disputes and assigns liability where appropriate. Processing errors and consumer disputes, on the other hand, go through a process that is like Visa’s existing litigation-based chargeback process.
4. What is the Merchant Purchase Inquiry?
Merchant Purchase Inquiry is a VROL plugin new to the Visa Claims Resolution process. This tool enables retailers to either upload transaction information and challenge a dispute, or simply issue a credit if the dispute is valid.
The introduction of the Merchant Purchase Inquiry plugin is a huge change. Before, retailers would need to choose either a lengthy and very complicated dispute process (with no promise of success), or simply accept a chargeback. With Merchant Purchase Inquiry, though, retailers can simply upload evidence and turn the dispute over to an automated process.
5. Will VCR actually improve the chargeback process?
Well … yes and no.
On the one hand, VCR promises faster dispute resolution, simplified processes and improved accuracy in adjudicating claims. There are shortcomings, though; for example, more complicated cases will still require arbitration, which is complicated, time-consuming and expensive. There’s no guarantee that the process will filter out friendly fraud, as friendly fraud is predicated on illegitimate disputes passing for legitimate ones.
VCR may be a positive step, but remember: it’s not the end-all “answer” for this long-lived and resilient problem. Retailers will still require long-term support to handle chargebacks effectively and maximize their risk mitigation efforts.
Monica Eaton-Cardone is the owner, cofounder and Chief Operating Officer of Chargebacks911, the e-commerce industry’s preeminent risk mitigation and chargeback management service provider. Named “One of 2017’s Most Influential Women in the Payments Industry” by PaymentsSource, Eaton-Cardone specializes in chargeback triggers and threats, aiding to reduce the liabilities and costs related to the entire dispute and chargeback process. She works with banks and merchants and has a background in technology and consumer-behavioral science. She has headlined business conventions, tech conferences and eCommerce expos all over the world, and her insights on digital threats, online fraud, friendly fraud and risk mitigation are a byproduct of her passion for creating both revenue and customer sustainability.