VMPI & Mastercom: CNP Merchant Chargeback Reduction
It’s not easy being a card-not-present merchant in today’s payment ecosystem. As fraud becomes more prevalent and sophisticated, most security protocols have been put into place to protect consumers.
Technology like the EMV chip has been very effective in reducing more than 80 percent of fraud in card-present transactions, but the online merchant community is yet to identify an effective solution like the EMV to minimize their chargebacks and fraud. In those circumstances, many of the new protections address the problem after the fact, via the chargeback process.
Chargebacks are a necessary tool for consumers, who might feel considerably less comfortable about online shopping without them. However, they can be a significant challenge for merchants to deal with, especially as they open the door to “friendly fraud” where customers request a chargeback on a legitimate transaction.
Visa and Mastercard have introduced two tools that are aimed at reducing chargebacks and the complexity of disputes.
The major card networks understand the need to balance the need for stronger consumer protections against the possibility of creating rules that can be exploited to take advantage of merchants. As such, the rules and technical aspects of their chargeback processes undergo frequent revision.
Visa and Mastercard have introduced two tools that are aimed at reducing chargebacks and the complexity of disputes. The Visa Merchant Purchase Inquiry program (VMPI) was finalized last year to give merchants a chance to address issues with questionable transactions very early on in the payment process, before it can turn into a chargeback.
Mastercard’s dispute resolution platform, MasterCom, has yet to see a full release, but they are testing with a few issuers and acquirers this year and provided some details about the state of the program at this year’s MAC Conference in Las Vegas.
The chart below lays out the differences between Visa's and Mastercard’s programs, the mechanisms by which they intend to reduce chargeback rates, and how much of a reduction merchants can expect to realize by participating in either program.
|Objective||Eliminate disputes and reduce dispute timeframes by providing a direct connection between merchant data and issuers||Eliminate disputes and reduce dispute timeframes by providing a direct connection between merchant data and issuers|
|Launch Date||April 2018||TBD|
|Reason Codes Expected to Reduce Chargebacks||Retrieval Request, Unrecognized Disputes, Fraud Disputes, Consumer Disputes||Retrieval Request, Customer Service, Fraud Disputes, Authentication Disputes, Processing Error Disputes|
|Reason Codes NOT Expected to Reduce Chargebacks||Processing Error Disputes, Authentication Error Disputes||N/A|
|Current Features||Collaboration: Merchants are given notice of purchase inquiries and have the ability to respond to issuers with order/transaction information within a matter of seconds||TBD|
|New Features to be Added||Rapid Dispute Resolution program will give merchants the ability to refund transactions within 24 hours (issuers will be required to temporarily hold new dispute submissions for 24 hours)||Merchants will be given the ability to resolve disputes within 72 hours by either refunding or negotiating with the customer (issuers will be required to temporarily pause chargeback escalation for 72 hours)|
|New Features Expected Launch Date||Late 2019||Late 2019|
|Enrollment Requirement||Merchants are not required to enroll in VMPI||All merchants will be enrolled in MasterCom through their acquirers|
|Integration Method||Enterprise-size merchants will be able to integrate with Visa directly. Small and medium merchants can enroll in VMPI through 3rd party facilitators like Chargeback Gurus||TBD (instead of direct integration, Mastercard may allow merchants to integrate their system with MasterCom either through acquirers or 3rd party facilitators)|
|Expected Cost||VMPI notification currently costs merchants between $8 to $10 per alert. Rapid Dispute Resolution cost yet to be determined||TBD|
|Service Activation Time Period||Within 2 weeks after enrollment and completion of integration||TBD|
|Predicted Chargeback Reduction Rate||40% to 50%||25% to 30%|