Visa is introducing a new process called Visa Claims Resolution (VCR) to resolve disputed transactions or chargebacks. While the goal is to simplify and expedite the claims resolution process, these changes will have an impact on your business. Payscout is here to help you understand how.
What does VCR mean?
With VCR, Visa is moving away from a “litigation based” dispute processing model to “liability assignment” based model. This essentially means that instead of each case of chargeback being treated like a “courtroom trial,” with several rounds of back-and-forth between all the stakeholders, Visa will automate a large part of the process and assign liability to the concerned party. This will reduce the amount of communication taking place between the issuer, merchant, and acquirer. The intention is to save time, resources, and cost. There will be human intervention only in case of complex cases of chargebacks.
Why is Visa making this change?
Visa found that it took an average of 46 days to resolve a chargeback, and in certain cases, up to 100 days. The objective of VCR is to simplify the process of addressing disputes and make it more efficient. This will reduce cost and wait times for you (the merchant) – but it will also reduce your response time (more on that further down the post). VCR aims to resolve chargeback issues within 31 days or less.
When will these changes go into effect, and who will be impacted?
VCR will be effective on April 13, 2018. The new rules will be applicable to all merchants, acquirers, and issuers worldwide. Ultimately, it will also impact your customers.
What is changing?
Under the current system, you can file a chargeback under 22 different Reason Codes. To simplify the process further, VCR will now allow cluster these reasons into 4 broad categories called Dispute Categories:
- Processing Errors
- Consumer Disputes
There are now two new process flows for tackling the disputes in these categories: Allocation and Collaboration.
Allocation will be used to resolve disputes under the Fraud and Authorization categories. Visa Resolve Online (VROL), the existing platform for filing disputes online, will play a pivotal role of automating the process. It will run an automated check of the chargeback filed by the customer and then automatically reject it:
- if the customer’s timeframe for lodging a complaint has elapsed
- if a return issue has already been filed in your system for the customer
Automatic blocking of redundant or ineligible requests will reduce the annual number of chargebacks by 14%, according to Visa, thereby shortening timelines.
In a case where a customer’s dispute qualifies, VROL automatically assigns the liability to the merchant.
While the majority of disputes will fall under the Allocation Workflow, some disputes would necessarily need several rounds of interaction between the merchants, issuers, and acquirers. This is particularly true for Processing Errors and Consumer Disputes categories.The process of Collaboration is the same as the current process of filing and resolving disputes.
What are the key takeaways business owners should know?
- Your response time decreases from 14 days to 10 days. You will have to develop a mechanism that allows you respond fast and accurately. Using electronic dispute processing options and enrolling for email notifications is strongly advised.
- Under allocation workflow, you will be able to defend a chargeback only if you have compelling evidence. This means that you will have to record and maintain evidence for every transaction.
- This blog post. We’ll keep updating this blog as we hear more from Visa on this new development.