If you operate in the eCommerce space, you’ve probably experienced the occasional payment dispute, called a chargeback.
The dispute process hasn’t changed much since it rolled out in the 1970s, which proved to be big problem for online businesses. In recent years, chargebacks evolved into a tool to enable fraud, rather than prevent it, costing merchants billions of dollars every year. However, that may finally change with Visa Claims Resolution.
Visa Claims Resolution (or “VCR” for short) is Visa’s new method of handling disputes. The program, which went live on April 13, 2018, saw Visa rebuild their entire dispute process from the ground-up. The goal was to bring chargebacks into the present day and adjust practices for the card-not-present environment. But of course, such a massive overhaul creates plenty of new questions, too.
I did a full rundown on VCR for the Chargebacks911 blog back when the policy first rolled out. However, I wanted to take a minute to address a few of the most common questions retailers have about VCR and see how expectations stack up against reality.
#1. What is Visa Claims Resolution?
Visa Claims Resolution 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.
The rules are designed to smooth out the transaction dispute process. VCR seeks to automatically assign liability whenever possible, rather than force banks and retailers to engage in time-consuming representation for each case. Representment will be reserved for more complex cases that demand closer litigation.
#2. Why Did Visa Make the Change?
Honestly…this was long overdue.
The chargeback process was designed for a pre-internet age and is poorly-suited for eCommerce. Now, seemingly-legitimate customers 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 customers by simplifying disputes, speeding-up resolutions, and filtering out fraud. Visa predicted their 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 Did the Process Change?
Visa Claims Resolution tossed out the existing Visa chargeback process and replaced 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’s existed for years, but now it plays a key role, serving as the superstructure of VCR. It’s the central means of communication between retailers, issuers, and acquirers, as well as the main medium to submit data for dispute resolution.
At the same time, dozens of existing Visa chargeback reason codes will be condensed down into four dispute categories:
- Fraud
- Authorization Error
- Processing Error
- Consumer Dispute
Fraud and authorization error disputes will be processed automatically based on a workflow to flag invalid disputes and assign liability where appropriate. Processing errors and consumer disputes, on the other hand, go through a process like Visa’s preexisting, litigation-based chargeback process.
There’s also an important addition to VROL you should know about called the Visa Merchant Purchase Inquiry (VMPI). This tool enables retailers to either upload transaction information and challenge a dispute, or simply issue a credit if the dispute is valid. It’s an acquirer-facing program, but you may still need to enroll with the bank to take advantage of VMPI in some scenarios. Check with your acquirer to ensure they’re using VMPI.
#4. Has Visa Claims Resolution Helped Merchants So Far?
Well…it’s hard to say “yes” with a lot of confidence.
On the one hand, VCR promises faster dispute resolution, simplified processes, and improved accuracy in adjudicating claims. There are still shortcomings, though; for example, more complicated cases still require arbitration, which is complicated, time-consuming, and expensive. Also, there’s no guarantee that the process will filter-out friendly fraud, as friendly fraud is predicated on illegitimate disputes passing for legitimate ones.
We at Chargebacks911 surveyed eCommerce merchants in a variety of verticals for a recent study. The data showed that Visa Claims Resolution has been a mixed bag, with some merchants finding it helpful, but others not so much.
Roughly one-third of respondents noted a decline in chargebacks after the VCR rollout. However, a nearly-identical number of merchants reported an increase in disputes during the same period. Overall, fewer than 1 in 4 merchants said VCR made the process better, while 38% of merchants felt it made things worse than before.
VCR may be a positive step in some ways, but it’s not the end-all “answer” to the chargeback problem. We need to keep pushing for new, better solutions to handle online disputes that are fair for merchants and cardholders alike. Until then, merchants are going to keep losing out.