Merchant 101: Visa Disputes
Whatever caused them to happen, whether they’re legitimate or not, there’s no denying that disputes are costly for merchants. In every dispute, there’s revenue from a transaction at stake, but that’s not the only way disputes can cost you...
Dealing with disputes takes time and labor, especially with acknowledgement of disputes being required by the credit card networks. Too many disputes that turn into chargebacks will jeopardize your good standing with your payment processor, which can force you into expensive deals with “high risk” processors.
Managing disputes requires a two-pronged approach. You must deal effectively with the disputes you cannot avoid, and employ best practices for avoiding disputes in the future.
When disputes occur, it is always a good idea to follow the procedures and guidelines provided by the card network. When disputes escalate, it’s the card networks who handle arbitration, review the evidence, and make the final decision. That in itself is all the reason you need to follow their rules and document the steps you took in the early stages of a dispute—it can help bolster your case later.
Their recommended procedures can also help you train your staff and improve operations to make disputes less likely to happen. Visa has the highest purchase volume of the major card networks, so every merchant should be familiar with Visa’s dispute guidelines. We’ll walk you through the important parts.
Why Customers Dispute
Any time a customer is unhappy with a charge and calls their bank to raise objections, a dispute can result. The first thing that will happen when a Visa customer complaint turns into a dispute is that it will be assigned to one of four dispute categories: Fraud, Authorization, Processing Errors, and Consumer Disputes.
Fraud disputes may involve actual, criminal fraud, or they may be “friendly fraud”—legitimate transactions reported as fraud by the cardholder out of ignorance or deception.
Disputes do not always arise out of direct interactions between the merchant and the customer. Acquiring banks and issuing banks can sometimes make mistakes that lead to disputes. Sometimes the banks can resolve a dispute without involving the merchant at all.
For disputes that are not born from fraudulent activity or merchant error, the cause is usually frustration, confusion, or dissatisfaction on the customer’s part. Maybe they feel buyer’s remorse after an aggressive sales experience, maybe the product doesn’t work as advertised, or maybe the merchant is taking too long to respond to customer service inquiries. Anything that bothers the customer enough to pick up the phone and call their bank can end up as a formal dispute.
How to Respond to Disputes
Notification of a dispute will usually come from your acquiring bank when they ask you for more information to determine the validity of the disputed transaction.
Adhere to any deadlines your acquirer sets for responding, and provide them with as much relevant documentation pertaining to the transaction as you can. With sufficient information to prove the validity of the disputed charge, it can be re-presented to the issuing bank. That’s all it takes to fight a dispute and stop a chargeback!
Some disputes, of course, cannot be countered with evidence: fraud and merchant error chargebacks, typically. While these must be acknowledged per the process outlined by your bank, there is no point in challenging a dispute that you know has merit.
When a customer approaches you directly with a problem they’re having, they’re doing you a huge favor. Even if their issue seems trivial and their remedy unreasonable, hear them out! Any time you can resolve a customer’s problem and issue a credit before they contact their bank, you are almost certainly preventing a costly and time-consuming dispute from happening.
When disputes occur for technical reasons—improper authorization, the wrong amounts, duplicate charges—merchant error is often the cause. Improved procedures, better staff training, and up-to-date payment processing technology can help lessen the frequency of these disputes.
Following all recommended security and authorization procedures will prevent a great many disputes that otherwise might slip through. For online merchants, AVS/CVV matching is one of the most important of these.
A clear and well thought-out return policy, along with generally strong customer service, can also prevent disputes. Make sure your receipts are legible, your merchant information is concise and unambiguous on cardholders’ bank statements, and that any returns are processed as quickly as possible along with a purchase return authorization to allow the cardholder to track their pending refund.
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.
As a merchant, dealing with customer disputes is part of your regular business routine. Passively accepting them and allowing the default outcome to subtract from your revenue, however, should not be. Acknowledging disputes, assessing their validity and the reasons behind them, and responding accordingly (that means fighting them, whenever possible) must be the strategy you adopt if you want to keep your earnings, protect your business, and continually improve.
Fighting disputes and chargebacks can give you an edge over competitors who don’t fight them and never gain insights into what aspects of their operations, marketing, and product design are alienating some of their customers. Some merchants may worry that fighting chargebacks will make them seem anti-consumer, but the truth is that learning from chargebacks and adapting your business to prevent them will actually make you a stronger company that’s more responsive to your customers’ needs.
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