VMPI Marches on Chargebacks
In the realm of card payments, Visa and Mastercard hold the keys to the kingdom. Their unparalleled market share gives them tremendous power when it comes to establishing the rules and expectations that banks, merchants, and all the other smaller players have to abide by. That’s why we’re always glad to see it when the big card networks are taking steps to make life a little easier and more fair for merchants. The Visa Merchant Purchase Inquiry program is a great step in this direction, providing merchants with a mechanism for responding to disputes before the dreaded chargeback process starts rolling into motion.
VMPI was created because Visa observed a massive spike in chargebacks in recent years, many of which were initiated solely because the cardholder did not recognize the transaction when they saw it on their statement. Nearly a fifth of all chargebacks were related to purchases of digital products and services, which creates additional barriers to recognizing and resolving unfamiliar transactions. Visa reasoned that both chargebacks and digital purchasing were on an upward trend with no signs of slowing down, and merchants and issuing banks would need a proactive way to address disputes and prevent unnecessary chargebacks from occurring.
The solution Visa came up with was VMPI, which answers the needs of digital merchants but works just as well for brick and mortar businesses. When VMPI is used effectively, it can reduce the timeframe for dispute resolution from weeks to minutes.
How VMPI Works
In the earliest phase of a transaction dispute, immediately after a cardholder calls their issuing bank to question an unrecognized charge, the issuing bank will make queries through the Visa network to gather more information about the transaction. It is at this point, before an actual chargeback has been initiated, that merchants who are enrolled in VMPI receive notice that a customer has asked to open a dispute.
The merchant can respond to this notice by either submitting information and evidence that proves the transaction was valid, or they can bypass the chargeback process (and avoid the associated fees and other drawbacks) by refunding the customer’s money directly.
A Guided Tour Through the VMPI Process
Understanding exactly how the VMPI process goes can be confusing, since so much of it takes place during the pre-chargeback period of inter-bank communication that most merchants aren’t aware of. To clarify things, let’s walk through a typical VMPI process step by step.
A customer makes a purchase with an online retailer for a digital media product. They consume the media and are left satisfied with the purchase, but quickly forget about it.
Three weeks later, the customer reviews their credit card statement and sees a transaction from “Digital Media eCommerce Ventures LLC,” a company they’ve never heard of before. It is, in fact, the retailer they purchased from in step one, but they use a different name for their internet store. They can’t remember making this purchase, so they assume it’s fraud or some kind of error.
The customer calls their issuing bank and tells the customer service representative “I didn’t make authorize this transaction, I don’t know what it is.” The issuing bank opens a query with Visa Resolve Online to get more information about the transaction.
VROL recognizes the LLC as a merchant who has signed up for the VMPI program. Through an integrated API, they send an electronic message directly to the merchant, notifying them about the pending dispute over the specified transaction.
Through an established response channel, the merchant provides additional information about the transaction: what was purchased, and when, through which storefront, and so on.
The issuer receives this information through VROL and passes it back along to the customer, who is able to recognize the transaction with the additional context provided. They withdraw their dispute, no chargebacks happen, the merchant keeps their money, and everybody is happy with the outcome.
VMPI and True Fraud
What if the facts of the scenario are different, and the transaction really was fraud perpetrated by a third party? Even in this case, VMPI can be beneficial to the merchant.
If, at step six, the cardholder says that they still don’t recognize the transaction and wish to proceed with the dispute, a real time fraud notification can be pushed to the merchant. The merchant may opt to reverse the transaction themselves at that point, and can use the information provided to analyze and improve their fraud mitigation efforts.
VMPI can also reduce “friendly fraud,” as these fraudsters will often back down if they get pushback from their bank. Friendly fraudsters are usually seeking the path of least resistance, hoping to reach compliant bank representatives who will immediately escalate their dispute claim. When the bank is able to respond with a wealth of details that strongly indicate that they knew exactly what they were purchasing, they’ll often back down.
Merchants who use VMPI effectively can expect to see a real impact on the numbers that matter most—their revenues and their chargeback ratio. Depending on the type of business, it’s realistic to anticipate a reduction in chargebacks of anywhere from 14% to 30%. But you do have to know how to navigate VMPI and be able to respond quickly through integrated channels.
We would advise any merchant struggling with chargebacks to enroll in VMPI. This can be done directly through Visa, but their onboarding process can be slow—especially for smaller merchants. For this reason, many merchants choose to enroll through a certified VMPI Facilitator (like Chargeback Gurus). A qualified facilitator can integrate, test, and train you to use VMPI much more quickly than Visa alone.
Many VMPI responses can be automated, but it’s very important to have as much continuous human monitoring as possible so that you can respond in time to stop chargebacks from happening. If you haven’t signed up for VMPI yet, it’s time to get on it! For merchants who have questions or need assistance, the Gurus are always here to help.