Is Visa Changing Its Chargeback Rules?

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Not long ago, we wrote a post covering why chargebacks happen, along with what businesses can do to reduce them. Regular visitors to our site may have noticed that this wasn’t our first discussion of chargebacks. There are a few reasons why this topic comes up on a fairly frequent basis. Not only can chargebacks be a very costly issue for any business that doesn’t fully understand how to handle them, but the rules around them change and evolve. In fact, it appears Visa is in the process of changing exactly how it deals with chargebacks.

Visa is Working to Protect Merchants

When you hear that a large payments company is changing their policies, it’s easy to assume that the changes will ultimately create a burden for merchants. The good news with this latest change is that that’s not the intended goal. Instead, Visa is making these changes with the intent of protecting merchants from unscrupulous consumers.

Before we dive into exactly what Visa is changing, it’s worth doing a quick refresher on the issue of friendly fraud. This phrase refers to consumers who make purchases with the deliberate intention of later disputing them. It’s believed that this behavior currently costs retailers as much as $16 billion a year.

Because this single issue is racking up billions of dollars a year in losses for all types of businesses, it’s easy to understand why Visa wants to get a handle on the issue. Despite just how big this issue has become, there isn’t a standardized way chargebacks are handled. Instead, every payments company handles them a little differently.

So the foundation of Visa’s plan is a new chargeback system. Named Visa Claims Resolution (or VCR for short), the company aims to simplify this entire process by focusing less on traditional back-and-forth litigation and more on liability.

As with many payment policies, the specific rules defining this issue are quite complex. But what’s promising is that Visa is building a lot of automation into their new system. That’s being done with the hopes that Visa will be able to weed out frivolous claims on behalf of businesses without requiring them to use a lot of resources.

There is a Catch

Even with the best intentions, it’s hard to roll out such a large new policy and system without creating some potential pitfalls for businesses. The first of those is the consolidation of chargeback codes. Instead of a total of 22 categories, there will now just be four, one of which is fraud. While this is being done with the goal of simplification, the potential downside is that businesses will rack up more fraud demerits on their record.

The other issue that may create some issues despite its good intentions is shorter response times. This is because, in certain situations, it may create a strain on businesses to gather all the information they need to defend against a claim. Since this system and policies are still being rolled out, be sure to check back with us to stay updated about any additional changes.

Posted on Monday, June 11th, 2018