Is Visa Claims Resolution (VCR) all it claims to be?

Times, they are a-changin’

A system designed to protect consumers from fraud has been abused, warped from an indemnity backup plan to an excessively-used, convenience-based crisis. The humble chargeback needed a revamp to keep up with a new breed of consumer and Visa has tried to get the wheels in motion.

As of April 2018, in order to “claim resolution” for an outdated system, Visa rolled out its new dispute process, Visa Claims Resolution (VCR). The new procedure may very well be a solution to a profit-absorbing loophole, but the overly-complex 806-page guidelines are difficult to get your head around. As a result, the implications of VCR are still somewhat of a mystery for many ecommerce and payments professionals.

What we do know is that, once the transition period is complete, VCR promises a more efficient dispute process for merchants and financial institutions with four main benefits:

Reduced false authorisation claims

Proactive dispute process

Better governance and monitoring

Better customer experience

But how does it work?

Currently, Visa is the only card scheme to have addressed this major industry issue. Mastercard has promised an update later in the year, but until then, the legacy “litigation-based” chargeback system is mostly still in play. Since Visa is the first to rock the boat, let’s break down what exactly the move to a “liability-based” system really means.

A decidedly drawn-out process, the legacy system works like a courtroom: the cardholder claims fraud or merchant error; the merchant accepts or challenges it; both sides present evidence, and the issuer decides who is in the wrong. Originally, this method worked and successfully protected consumers from merchant wrongdoing. But modern consumers are much more demanding and friendly fraud has hit new heights in the digital age.

So, liability-based VCR comes in. While litigation hasn’t disappeared, it now uses existing data to automatically assign responsibility. Realistically, using automation to eliminate clearly invalid cases should noticeably lower the number of complaints that actually move on to the litigation phase.

Playing the blame game

With VCR, liability is now apportioned into two main tracks with four subgroups. First up, Allocation for Fraud and Authorisation disputes:

Using standardised rules, the automated platform Visa Resolve Online (VROL) determines a dispute’s course of action in real-time. This is a significant change; it’s the first time Visa will be making automated decisions based on the data it extracts from authorisation and clearing systems. Now, illegitimate cases are automatically rejected, but for valid disputes, merchants will be responsible.

Crucially, merchants are now required to reply to disputes no matter what. Whether to accept or fight a claim, Visa will be penalising those that fail to respond with new fees. As well as having to respond, merchants now need to do so in half the time.

Cases that are sifted through to the Collaboration track for Consumer and Processing Error disputes hasn’t changed and is relatively self-explanatory: issuers, acquirers and merchants work together to resolve the dispute before liability is assigned.

For the love of data

A side effect of the new regulations coming into play this year is that everyone is starting to realise just how crucial storing data correctly is. With VCR, things aren’t any different. Processing and storing data correctly is vital to streamlining the dispute process.

Visa’s Merchant Purchase Inquiry (VMPI) function aims to speed up communication further. With VMPI, merchants have the opportunity to work with their bank or a licensed facilitator to supply additional data to Visa. Opening up communication channels is a fantastic way for banks and businesses to build a mutually beneficial rapport – with additional data, issuers can offer evidence-backed explanations for unjustified disputes.

Repeal the appeal

Just as with the legacy system, merchants are encouraged to dispute any chargeback claim that was filed incorrectly. But with VCR, they may have more difficulty complying.

Failing to work within the shorter timeframes, or not responding entirely means additional fees and penalties. These rules are being enforced and a change of behaviour in how disputes are handled must be a priority to avoid additional liabilities/costs. But since Visa gets the final word and the benefit of new charges, who’s profiting most here? …

Time will tell, but we suspect that once merchants acclimatise to these new revisions, Visa will restrict timeframes further, seeing more benefits for the global card scheme.

So is VCR a cure for this age-old problem? Not entirely. If merchants are proactive and efficient, can they use the system rather than have it use them? Definitely.

More than ever it’s clear that merchants need support to handle payment disputes effectively and maximise their risk mitigation efforts. For more detail about how you can manage the latest changes from Visa, drop us a line at info@thechargebackcompany.com or download our tell-all guide: https://thechargebackcompany.com/whitepapers/visa-claims-resolution/

About Tracy Cray

Tracy has over 35 years’ experience in the Credit, Prepaid & Debit Card Payments Industry, specialising in Chargebacks and Section 75 of the Consumer Credit Act 1974 at the Royal Bank of Scotland (RBS) before joining The Chargeback Company as Director of Card Scheme Compliance. Using her in-depth understanding of card schemes and influential relationships within the industry, Tracy leads the team to provide expert advice and assistance to issuers, acquirers and merchants in their chargeback handling. Tracy also chairs a number of chargeback and scheme forums including the European Experts Chargebacks Group.

About The Chargeback Company

The Chargeback Company, known as Chargebacks911 outside Europe, provides comprehensive and highly scalable solutions for chargeback and dispute processing compliance, handling services and fraud strategy management. The company helps decrease the negative impact of chargebacks, thereby increasing revenue retention to help ensure sustainable growth for every member of the payment channel.