Visa Claims Resolution (October 2019 Update)
It has been over a year since Visa introduced Visa Claims Resolution (VCR), a program designed to make the process of resolving transaction disputes faster and eliminating invalid claims before they can enter the system as chargebacks. Part of Visa’s 2018 credit card payments mandate, VCR was intended to work by simplifying the reason categories disputes were assigned to, use internal VisaNet data to assign liability more equitably, and identify fraud and abuse. Visa’s hope was that these improved processes would prevent invalid disputes from escalating and make the overall process move more efficiently for all parties concerned.
It’s fair to ask, at this point: has it been working? Visa has an answer to that, in the form of an update to the VCR process, along with statistics about how well it has been fulfilling its prescribed function over the past year.
With Visa, the dispute process begins with investigation. When a dispute claim is received, Visa initiates a transaction inquiry in VisaNet to pull data related to the transaction. The Visa Merchant Purchase Inquiry (VMPI) system can come into play at this point, giving merchants a chance to respond with their own information about the transaction. Visa will also prompt the disputing party to review their bank statement for any credits that may be associated with the transaction they’re disputing.
Disputes that cannot be declared invalid at this point proceed to the next phase, where Visa looks for associated transactions, prompts, warnings, and other indicators that can be used to validate the legitimacy of the transaction.
If the dispute is still alive after that, it is diverted to one of the two primary dispute categories under VCR: Allocation or Collaboration. Allocation claims include fraud and authorization issues; all other dispute reasons—merchant and processing errors, primarily—fall under Collaboration. Typically, Visa resolves Allocation disputes on its own within 48 hours. Collaboration claims may require the input of the merchant, issuer, and acquirer.
Does VCR Work as Promised?
Prior to launching VCR, Visa predicted that 20-40% of claims would fall under Collaboration, with Allocation taking the rest. They weren’t off base. A review of all claims from the launch of VCR until June 2019 found the actual split to be 19% Collaboration, 81% Allocation.
This is almost certainly what Visa was hoping to see, because VCR has the greatest potential to speed up the resolution of Allocation claims. This process under VCR leverages the cardholder’s entire transaction history to determine the validity of the claim, and enforces all necessary rules and edits up front, before the chargeback process begins. The result? A simpler, streamlined process that leads to speedier resolutions.
Visa has further determined that, with VCR in effect, around 5% of disputes have been canceled after initiation and another 10% canceled later in the process after being found invalid. Issuers and acquirers have had to engage in 31% fewer interactions to resolve disputes in progress, and the average timeframe for resolving a dispute is 24 days—a drop of 55% from the pre-VCR era.
So far so good!
What Makes a Dispute Invalid?
Merchants should be particularly interested in the criteria Visa uses to pre-screen invalid disputes, as they may provide some insights into effective methods for fighting similar disputes that slip through the cracks. Visa was helpful enough to provide the top five reasons why invalid card-not-present disputes get blocked from proceeding further:
- Exceeding the 35-dispute limit. Issuers can only chargeback a maximum of 35 transactions on a single card number within a 120-day timeframe.
- Out of time. Disputes are automatically blocked if the maximum time limit is exceeded.
- Duplication. Transactions that have already been disputed or charged back are automatically blocked.
- Verified by Visa. Transactions that have been fully authenticated through the Verified by Visa program cannot be disputed.
- A history of fraud. Disputes initiated for transactions that took place after either an initial fraud report (or the first fraud chargeback for the same card number) are blocked.
Best VCR Practices for Merchants
Left to its own device, VCR is doing helpful work on behalf of merchants, reducing the number of invalid chargebacks that must be acknowledged and fought. There are, however, some additional proactive steps merchants can take to maximize the benefits they get from VCR.
- Don’t issue a credit after a dispute has been initiated—at this point, it’s too late for the credit to stop the dispute and just complicates the resolution process.
- Always refund using the same currency as the original transaction.
- Make sure your credits show up under the same merchant name as purchases.
- To avoid disputes, process Visa payment credits immediately.
- Work with your acquiring bank to set minimums and thresholds for dispute responses—prompt responses avoid fees!
- Protect yourself from fraud chargebacks by using Verified by Visa and other additional security layers.
VCR is just one of many resources available to merchants in the fight against chargebacks. While most of VCR’s benefits are conveyed passively—it’s out there, stopping invalid disputes, regardless of the actions the merchant is taking—it is always possible to optimize your business practices and policies to operate more harmoniously with the rules and requirements imposed by Visa and the other major card networks.
VCR has introduced global changes to the rules, processes, and systems that govern Visa’s dispute resolution process. An analysis of the data collected since VCR’s inception seems to indicate that VCR has improved the outcomes and efficiency of the overall process, and Visa anticipates the efficacy of VCR to increase over time. As many as 15% of dispute attempts have been stopped from turning into chargebacks as a result of VCR—that’s an outcome that should make merchants very happy.
We hope that Visa will continue to make adjustments and improvements to VCR over time to further enhance its ability to detect and prevent invalid disputes. By doing the work of eliminating these claims before they become chargebacks, Visa is helping merchants and their chargeback representatives focus on dealing with the more complex and ambiguous chargebacks that require more research and documentation to invalidate.