Top Changes to The Card Brands and the Chargeback Mitigation Process
Online e-commerce continues to grow and with this so does the potential for chargebacks. According to Visa in 2015 over 2.6 million chargebacks were initiated because card holders didn’t recognize the transactions and nearly a quarter of them were related to digital goods. Card brands and developers quickly went to work looking for solutions. Many of us use them today. As we all work toward the goal of eliminating the need for chargebacks all together, there are some big changes happening in the mitigation world. I’m not the most technical person, but luckily, I’m surrounded by a team of experts who are- so together, we looked at the major changes and here’s what they mean to you.
The Visa Merchant Purchase Inquiry Program, or VMPI, no longer exists. What happened? Why? These are the questions many merchants have been asking. Don’t worry, this dispute resolution service isn’t gone forever it just became part of the Visa Resolve Online program known as VROL and the good news is, it could help lower fees. Last August, Visa acquired Verifi, a leader in technology solutions that reduces chargebacks. It eliminated the free VMPI service where you could connect directly through Visa. Now in order to use the new incarnation of VMPI, processors like us at Segpay must go through Verifi. With Verifi “Resolve,” Visa says merchants will have access to resources that link all parties in the dispute management process. They’ll be connected in near real-time to do a few things like resolve disputes before they become chargebacks, give buyers and sellers data-driven tools to improve the customer experience and create an end to end solution. This month, Visa will be rearranging VROL to provide greater emphasis to the Resolve integration. Under Visa’s dispute rules, all issuers and acquirers that are members of Visa must use VROL to respond to or carry out any retrieval requests. While use is voluntary for some aspects of the dispute management process, we’re hopeful integration will improve over time to more closely align with MasterCard’s system.
Mastercard’s Eliminator and Alerts
Chargeback resolution services continue to evolve for other card brands too. Mastercard is now using the Ethoca Eliminator solution. It’s very similar to what Visa is using through Verifi. The Eliminator program aims to mitigate incoming friendly fraud disputes on the spot providing cardholders with instant access to real-time merchant intelligence the moment a call is made to a bank or an inquiry has been made through their desktop or mobile banking app. Mastercard says that over time the Eliminator will help to retrain the cardholder and provide clarifying information they need to recognize their own purchases, reducing friendly fraud and creating a simpler payment process with less friction. This month, Mastercard will connect every bank with the Eliminator system and participation in all aspects of the program are mandatory.
The Call Process & Open Communication
Both Visa and Mastercard’s programs are similar with instant reporting and through a series of calls occurring in near real-time to prevent chargebacks. We thought it was important to point out the first three calls being used at Visa. A call type one is when an issuing bank has an opportunity to ask the merchant for more details in real-time. The merchant would have the opportunity to send the transaction details back to the bank with information like login, IP, 3D Secure and more so the customer could recognize their transaction or that the issuing bank can deny the transaction and say it’s not eligible for a dispute. This process is known as a deflection. A call type two fights fraud disputes using TC40 data to get the alert and allows the merchant to choose what to do with it. This process will have a subscription fee per descriptor. Lastly, a call type three sends a notice to the merchant telling them that a chargeback is on the way so they can block the cardholder and stop delivery of any product or service faster than the traditional chargeback channel.
Like Magic, Turning a Chargeback into a Refund
Visa and MasterCard have taken very different approaches here. MasterCard has mandated that all issuers must participate in the program. Visa has said all issuers must support the program, but participation is optional.
Any direct Mastercard alerts will result in a chargeback, but a merchant can now review the alert and refund the dispute prior to the chargeback cycle completing. This allows for complex decision making based on a specific customer and their activity. Visa has the Rapid Dispute Resolution system in place where a merchant can provide a fixed set of rules (bin, date, amount, currency, purchase identifier, dispute category and dispute condition code), when if matched, will automatically refund the dispute prior to the chargeback cycle completing. Both systems give a merchant the ability to turn a chargeback into a refund, eliminating the inevitable chargeback fee, and it will not count towards the excessive chargeback monitoring program.
In the end, these are all positive changes, and we’re hopeful that the systems will continue to mature and provide an even greater ability to manage disputes in a responsible manner in the future.
Need help or have questions on chargebacks mitigation, we can help. Reach out at [email protected].