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Will Visa Claims ResolutionHelp or Hurt Merchants andBanks?

Monica Eaton-Cardone

March 26, 2018

Ecommerce fraud attacks are still on the rise despite increasingly common antifraudtechnologies like geolocation, address verification and even biometric technology.In fact, research from The Nilson Report suggests ecommerce fraud will costmerchants globally nearly $50 billion by 2025. Why is this, despite all the advancedsecurity in place?

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It’s o"en because merchants aren’t addressing the right threat sources. Forexample, consumer chargeback fraud, commonly known as friendly fraud, isprojected to be the driving force behind rising losses during this period. However,the new Visa Claims Resolution (VCR) process, which takes e!ect on April 15, 2018,may change that.

What is Visa Claims Resolution?Visa suggests that VCR transforms disputes from a litigation-based model to aliability assignment one. The new Visa Resolve Online digital platform seeks toweed out invalid disputes, automate the assignment of liability to merchants orbanks and allow for faster chargeback resolution.

Under current rules, banks have between 45 and 100 days to process disputes,compared to just 15 days for merchants. But thanks to the digital processesintroduced under VCR, banks can cut that time down to as little as 20 days. Ofcourse, VCR will profoundly impact merchants in many ways other ways.

For example, issuers will no longer be able to file chargebacks using reason code 75(“Unrecognized Transaction”). Instead, they will need to conduct greater duediligence and collect more in-depth information from cardholders.

That’s good news for merchants, but it’s not all ideal. They will face additional fees ifthey fail to provide dispute information in a timely manner, while less consistencybetween card schemes makes errors more likely.

The Impact of VCRVCR could be a major windfall for merchants, or it could mean higher costs and nosubstantial reduction in chargebacks. It does not mean an “end to chargebacks,” assome have incorrectly suggested; it merely transforms the process for how disputesare carried out. Its impact depends on whether merchants are ready to adapt.

The new rule set covers everything from how to collect dispute resolutioninformation to the automated and human-centered processes that enable rapidresponses, and businesses unprepared for it will lose out. Merchants have moreincentive than ever to engage in dispute representations, as the new processrestructures outdated reason code models to create a more collaborative process.Without the right strategies, though, they can face even greater costs than under thecurrent system.

The industry-wide lack of preparedness already led to VCR being pushed back once;its original go-live date was back in October. With a month to go until the new livedate, I don’t see another reprieve coming.

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My advice to merchants and acquirers is to immediately review all existingprocesses and management strategies, even those partially related to chargebacks.Very few businesses will have ready-made infrastructure that can integrate theirprocesses directly with Visa Resolve Online without taking additional steps.

Every business potentially impacted by VCR should gauge if it has the availablesystems and resources, or if upgrades are required – especially those who attemptto handle chargebacks in house. Fraud and risk management teams assigned tomanaging chargebacks should already be in the process of adapting to Visa ClaimsResolution. The changes will shake up roles, meaning that some sta! reallocationand new training will be necessary.

Alternately, businesses that outsource disputes to a chargeback management andmitigation firm should verify that their service providers are ready for the VCRchangeover. That’s a fundamental factor for any business, and neither merchantsnor their acquirers can a!ord to let it go unchecked.

Monica Eaton-Cardone is COO of Chargebacks911 and CIO of its parent company,Global Risk Technologies

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