Best Practices for Resolving Visa Merchant Disputes
In the card payments industry, there is no higher authority than the big card networks: Visa, Mastercard, American Express, and Discover. They make the rules, and the banks that want to issue cards under their branding are required to follow them. So when one of the card networks releases guidelines for merchants to follow when transaction dispute occur, merchants should pay close attention.
Visa recently published an up-to-date guide outlining merchants' best practices for dispute resolution. Their objective is to help merchants know what to do in these situations so that they can follow the rules and make timely, informed decisions that foreground the best interests of their business.
For your convenience, we'll summarize the key takeaways that will help merchants deal with chargebacks and disputes more effectively.
Best Practices Pre-Dispute
Merchants can strengthen their position against chargebacks by following best practices for transaction processing before they occur. That way they are more likely to have compelling evidence and an airtight case against any improper chargebacks that may follow.
Visa advises merchants to accept all types of Visa cards and to adhere carefully to their basic payment acceptance rules for all transactions. They also emphasize the importance of including all the proper authorization and transaction data in the authorization requests you submit, which includes the following:
- Correct transaction date
- Merchant Category Code
- Merchant/transaction type indicator
- Country/state code
- Special Condition Indicator
Authorizations processed without this data will be vulnerable to chargebacks that you won't be able to defend against.
Normally it's a good thing to process refunds quickly, but not once a dispute has been initiated. If you see a chargeback, it's too late to resolve the dispute by issuing a refund. Doing so will just double your potential revenue loss and complicate the dispute resolution process.
However, whenever you communicate to a customer that you will be processing a refund for them, it is important to do so as soon as you possibly can. Delays in refunding are a frequent cause of cardholder frustration and "friendly fraud" chargebacks.
When issuing credits, always use the same currency and merchant business name used in the original transaction. Effective October 2019, refunds to Visa cards must be preceded by a purchase return authorization. This enables cardholders to see pending refunds on their bank statements in real time, which should help to reduce impatience and customer service inquiries.
When merchants fight their chargebacks by making a second presentment of a disputed charge, compelling documentary evidence may be required to prove that the original charge was valid and should be upheld. Visa specifically mentions "compelling evidence" as the appropriate response to disputes carrying condition codes 10.4 (other fraud—card absent environment) and 13.1 (merchandise/services not received).
Visa also advises merchants to seek advice from their merchant banks for guidance on what would constitute valid compelling evidence for a given dispute.
Visa sounds some cautionary notes regarding arbitration for merchants, emphasizing the importance of understanding your rights under the arbitration process before filing. Merchants need to know what remedies will or will not be applicable for their specific dispute, and should be fully aware of the fees they might incur if the matter is settled in favor of the cardholder.
Visa's Merchant Tools
To make life a little easier for merchants, Visa offers some online tools designed to help them manage disputes and other transaction-related issues. The one merchants should be most familiar with is the Visa Merchant Purchase Inquiry system, or VMPI. This system allows merchants and issuing banks to communicate through Visa to exchange information about questionable or incomplete transactions before they escalate to a full-on dispute.
Visa states that merchants who receive a high volume of chargebacks for transactions that are unrecognized or believed to be fraudulent by the cardholder, merchants who deal in small-value transactions, and merchants who are experiencing a surge in chargebacks related to digital goods are the merchant types most likely to see a reduction in disputes by using VMPI.Visa also offers an online dispute guide geared toward smaller merchants and a more comprehensive step-by-step guide for responding to specific chargeback reason codes.
Keeping up with each card network's own special rules, procedures, and best practice recommendations can feel overwhelming, but it's a case where the benefit of doing so is crystal clear. Staying in compliance with their guidelines and following their dispute-handling suggestions gives you the best chances of beating disputes and holding on to your revenue.
Remember too that you don't have to figure this all out on your own. A good chargeback management firm will not only know the ins and outs of Visa's rules (and Mastercard's, and the rest). They'll also be able to step in directly to handle technical processes like VMPI communication as well as work with you to train your staff and adjust your business operations to stay in compliance with both the existing rules and any future mandates.
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