In 2019 and 2020, Discover issued a mandate that made a number of changes to how the network handles chargebacks. These changes were likely made at least in part as a response to a similar mandate issued by Visa. One of the most significant changes Visa made was to decrease the time limit for a dispute response to 30 days. This change was intended to decrease the overall time it takes to resolve a chargeback.
Discover also brought forward the deadline for merchants to respond to a chargeback. That's not the only change that was made by this mandate, however. The other major change was a liability shift that affects certain merchants who use Discover ProtectBuy. Let's take a look at these updates, what merchants need to do to comply with them, and what effects they've had.
The complete changes to the Discover Dispute Rules Manual can be difficult and time-consuming to try to wrap your head around, so we'll summarize the most important ones. Let’s take a look at what changed and how it will affect merchants who accept Discover cards.
Discover initially made these changes in version 19.2 of their dispute rules:
Discover then followed up with further updates in version 20.1:
Card-not-present sales by acquirers or merchants operating in the following three additional MCCs that use ProtectBuy and receive a ProtectBuy authentication response of “Authentication Successful” or “Authentication Attempted” may be subject to dispute:
In addition, merchants using an outdated version of ProtectBuy may no longer be eligible for its protections.
If an acquirer/merchant uses ProtectBuy version 1.0.2 to initiate a ProtectBuy Authentication Request for a card-not-present sale and the issuer is certified to use ProtectBuy version 2.0, the ProtectBuy authentication request will be declined and the transaction may be subject to dispute.
The next major change Discover made applies only to transit agencies:
Merchants should make sure that the process of deciding whether to fight a chargeback, gathering evidence, writing a rebuttal letter, and submitting representment is consistently handled with appropriate speed and efficiency. If your timetable goes anywhere near those deadlines, you risk losing thousands of dollars with a single slip-up if a large and complicated chargeback comes your way.
Discover’s reason for shortening these time limits is to align with industry standards and equalize the request/response stages between issuing banks and acquiring banks.
Since most merchants should already be in the habit of complying with Visa's reduced time limits for disputes, these changes shouldn't be much of a hassle. As long as you're responding to chargebacks within 30 days, you won't have to worry about which network is handling the dispute.
The 5 calendar days merchants have to respond to ticket retrieval requests under these rules should still be more than enough. Ideally, you should be responding to any retrieval requests you receive in a matter of hours, not days.
One compelling reason for merch
To avoid being subject to the first ProtectBuy update, all merchants need to do is make sure they've updated to the latest version of ProtectBuy. Unfortunately, the second update simply exempts certain types of merchants from the dispute protection ProtectBuy offers in certain cases, and there's not much you can do to change that.
With an eye to the future of transportation (and the ways in which harried commuters will want to pay for it), Discover is allowing some companies that serve as transit agencies (as identified by the transit-related MCCs they fall under) to process transactions in a streamlined manner.
Specifically, Discover is enabling contactless payment processing by allowing these companies to utilize bank products that store and provide payment information through the use of contactless taps.
Transit customers can use their payment cards, smartphones, or any device equipped with the required RFID technology to “tap” a point-of-sale terminal properly outfitted to receive and process the payment information transmitted by the device.
In other words, instead of requiring passengers to run their actual credit cards through a card reader to purchase tickets and fares, they can simply tap their payment device against the payment reader on their way to board the mass transit vehicle.
Because commuter trips will often involve more than one stop or transit vehicle, payment processing is greatly simplified when multiple fares can be aggregated into a single settlement transaction. To facilitate this, Discover will make a nominal authorization to aggregate multiple journey fares. Multiple taps on the same card or device will then be processed as one transaction.
This change leverages the advantages of contactless chip payment devices to cardholders’ advantage. Merchants in the transit sector must keep in mind that issuing banks will be permitted to initiate disputes for settlement transactions that exceed $15, once 14 calendar days have passed.
Most merchants will be pleased to see that Discover’s mandates are less far-reaching and impactful than the ones recently handed down by Visa and Mastercard. As long as merchants keep the new deadlines in mind and make sure to update ProtectBuy if they use it, most won't see any negative consequences.
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