Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 12.3, which indicates an improperly processed transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback is usually merchant error or friendly fraud. Merchants who believe they have received an invalid chargeback under reason code 12.3 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 12.3?
Visa chargeback reason code 12.3 falls under the “Processing Errors” category. The shorthand description is “Incorrect Currency.” The use of this reason code means that the transaction specified a different currency type than what was actually processed by Visa, or that Dynamic Currency Conversion was used and the cardholder is claiming that they were not advised about the use of Dynamic Currency Conversion or did not agree to it.
Dealing with international currencies can be challenging, especially for smaller merchants who aren’t used to it. Dynamic Currency Conversion can be a convenient solution, but it does not always provide the optimal conversion rates for the cardholder.
Merchants who use Dynamic Currency Conversion without fully disclosing its drawbacks risk creating situations where the customer feels taken advantage of and decides to dispute the transaction.
What Scenarios Might Lead to This Chargeback?
This chargeback is usually attributable to merchant error. When processing transactions that involve currency conversion, untrained or inexperienced staff may enter the wrong information and process the transaction incorrectly. If the cardholder notices the error they may dispute it with their bank, especially if the error resulted in an unfavorable conversion rate or added fees.
Dynamic Currency Conversion is often one of the motivating factors behind this chargeback, as it sometimes ends up costing cardholders more than they expect. Even if the cardholder did agree to use Dynamic Currency Conversion, they may file a friendly fraud chargeback claiming otherwise if they are sufficiently displeased with the final transaction amount.
What are the Important Timeframes?
For this dispute, Visa requires that its cardholders file their claim within 120 calendar days of placing the transaction. The acquirer and/or merchant have 20 calendar days to respond to this chargeback after it is filed.
How Can Merchants Fight this Chargeback Code?
Merchants can fight this chargeback if the basis for it is false or erroneous. Your chargeback response should include the following:
- Proof that the cardholder was advised about Dynamic Currency Conversion and agreed to use it.
- Proof that Dynamic Currency Conversion was not used and the transaction was processed correctly.
- Documentation that proves that the correct currency was used in the transaction.
- If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
- If you have resolved the issue directly with the cardholder, provide proof, such as written correspondence, that proves they no longer wish to dispute the charge.
How Can Merchants Prevent this Chargeback Code?
One way to avoid chargebacks related to currency conversion is to require transactions in local currency only, but this isn’t a realistic tactic for merchants who serve international customers.
Make sure that you and your employees understand the rules, costs, and procedures that relate to currency conversion, and make sure you fully explain the currency conversion options and costs to your customers before processing their transactions.
The following tips can help you avoid this kind of chargeback:
- Do not use Dynamic Currency Conversion as the default option when processing transactions. Ask the customer if they want to use the service, but don’t make it mandatory or apply it automatically.
- Always inform customers ahead of time about any currency conversion that needs to take place, as well as any applicable fees they may be charged.
- Always give customers the option to pay using local currency.
- Train your staff on the use of transaction codes and the correct procedures for handling foreign currency transactions. Make sure you have established protocols for dealing with different currencies.
About Visa Chargeback Reason Codes
Reason codes are alphanumeric codes that provide the justification for granting a chargeback. Pursuant to the Fair Credit Billing Act of 1974, cardholders have the right to dispute unauthorized or erroneous charges and issuing banks must reverse a disputed transaction of the cardholder’s claim is valid.
When a cardholder contacts their issuing bank to dispute a transaction and receive a chargeback, the dispute is assigned a reason code that most closely matches the substance of the cardholder’s claims. The reason code provides the merchant and other stakeholders in the dispute with a concise explanation for why a chargeback has been granted.
Each card network—Visa, Mastercard, American Express, and Discover—defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands.
Visa specifies 46 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, Consumer Disputes, and Processing Errors. Visa uses a numeric scheme for its chargeback reason codes.
Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. Identifying the chargeback reason code and the evidence required to fight it is the first step in chargeback representment, and analyzing your chargeback reason codes can provide you with insights into what types of disputes are causing you the most trouble. With this information, you can determine the root causes of your chargebacks and take action to prevent them from reoccurring.