In April 2018, VISA will roll out its new Visa Claims Resolution (VCR). The global payments system provider had planned to roll out this new process last October, but it chose to delay it. There is no reason to believe that it will be delayed again and so merchants, acquirers and issuers are urged to prepare for what the company is calling “the next evolution in dispute processing.” It involves new issuer and acquirer dispute resolution actions and decisions that must take place according to a certain timeline.
Because everyone involved in the credit card value chain: issuer, acquirer and merchant must implement the new VCR program rules, we want to provide a short overview of the changes that VISA will be bringing to its claims resolution process and describe our response to these changes.
As a trusted partner to some of the largest credit card issuers and acquirers in the world, we have a vested interest in helping our clients respond to these changes in a way that ensures compliance but that also guarantees the least negative impact on their bottom lines.
Why this is happening
VISA has said that the new program was created in response to an increasing number of disputes, which have led to an increase in both processing time and costs. According to VISA, VCR has three major objectives: (1) to make better use of Visa’s existing internal data; (2) to introduce automation where possible; and (3) to streamline existing processes and timeframes in the cases when issuers and acquirers still need to interact.
Ultimately, VISA hopes the VCR initiative will create a liability assignment model that uses data to simplify processing, speeding up cycle time for disputed transactions and moving the industry away from the litigation-based model that the industry has been caught up in up to this point. The company hopes this will reduce the time it takes to handle all claims, but particularly the most complex, which currently require 46 days, on average.
Perhaps most importantly, VISA says the new system will completely eliminate invalid chargebacks whenever possible. For example, should a customer try to initiate a chargeback after the time limit has expired or if the claim fails to meet the minimum criteria, VISA will block the dispute.
Specific changes coming from VISA VCR
There are a number of important changes that are part of this new program and we’re only going to touch on a few of the most important here. Most of these changes seem, at least on the surface, to make the process more complicated for issuers. For instance, VCR brings with it four new dispute reason categories, Fraud, Authorization, Processing Errors, and Consumer Disputes.
Further, VISA is rolling out 25 new condition codes that will all fall within these four new categories. The structure of these codes VISA uses for disputes is also more complicated in that it will be longer and include one or more decimal points. VISA says that all issuers that have internal systems that consume dispute reason codes and dispute categories will have to update their systems.
VISA will use a new set of business rules to block invalid disputes. If not blocked, the time period for dispute resolution will fall to 30 days. Merchants must respond by day 18 for Allocation disputes and by day 24 for Collaboration disputes, which will each have their own workflows. Merchants will have 30 days to respond to VISA chargebacks, down from 45 days they have had in the past.
The goal, according to VISA is that the back-and-forth communication process between the merchant, acquirer, and issuer that has bogged down the process in the past will give way to a better system that uses up-front information. This should result in a quicker chargeback resolution, which VISA says should all be done within 31 days.
New dispute resolution workflows
Under VCR, every dispute will follow one of two workflows, Allocation or Collaboration. Fraud and Authorization disputes will follow the former and Processing Error and Consumer Disputes will follow the latter.
In this process, VISA will perform a series of automated checks on the dispute to determine whether it pertains to a 3D secure authorized transaction, whether the dispute falls within the timeframe, and whether a refund has already been made. If so, it will block the dispute.
If the dispute is not automatically blocked, Visa will assign liability to the merchant. Unlike the past, where the merchant could submit a response to a fraud chargeback, regardless of any evidence provided, VCR holds that defending against the chargeback will only be possible in specific circumstances. Further, the merchant can respond only in cases where it can provide definitive proof that the chargeback is invalid.
This opens merchants to significant risk and means that their response must be made in accord with VISA’s specific rules. VISA expects most disputes to flow through this workflow.
VISA expects that there will still be some disputes that require some interaction between merchants, acquirers, and issuers. The Collaboration workflow will serve this need and is basically the same as the current VISA chargeback process.
The need to tighten up dispute handling
While Visa says its new claims resolution process will save time and increase efficiencies, some merchants are already grumbling in online forums. They worry that with less time to respond to chargebacks, the playing field will tip too far in favor of the cardholder. If it goes to arbitration and the merchant loses, the fees involved, which could amount to $500 or more, will become the responsibility of the merchant.
Some worry that the new rules will make it a losing proposition to respond to a chargeback at all, given VISA’s rigid requirements. In truth, it just requires everyone in the chain to tighten up their own dispute handling process. Some software developers are already working to provide apps for merchants that can help them respond appropriately.
Another option for merchants is to get more information. VISA is offering an online class to help merchants better understand the changes through its VISA Business School. The class takes only 15 minutes and promises to help merchants “simplify the dispute process and reduce associated time and costs.”
The course promises to provide a clear working definition of the VCR initiative and explains the forces that led VISA to develop it. The issue suggests that the material is suitable for beginning staff as well as those experienced in chargeback and other dispute resolution processes.
Based on our experience is supporting our card customers, disputes and chargeback processing has always been a time consuming and expensive process. SLK Global’s (http://www.slkgroup.com/global/), Dispute Center of Excellence has helped its customers, both issuers and acquirers, reduce chargeback processing turn times by around 50% through its through its call center and comprehensive dispute management capabilities.
For more information about what we can do to help you deal effectively with these important changes, contact us today.
About the author
Head of Banking Operations at SLK Global Solutions (http://www.slkgroup.com/global/), a provider of comprehensive technology-enabled business transformation solutions for Card Origination, Servicing and Dispute Processing for Issuers, Acquirers and Service providers