To address the rising number of disputes and increases in processing time and cost, Visa will be rolling out its Visa Claims Resolution (VCR) initiative effective April 15, 2018. Visa created VCR to automate and simplify the dispute-resolution process while keeping pace with an evolving payment industry. This post will examine VCR and the resulting changes to Visa’s dispute process, and discuss what this means for merchants.
Under the VCR initiative, the dispute process will move from a litigation-based model to a liability assignment model. The idea is that VCR will leverage existing data to proactively eliminate invalid disputes, simplify the disputes process, and speed up the end-to-end time for resolving disputes.
Visa designed VCR to provide merchants with four primary benefits:
- Reduction in dispute volume through system enforced rules
- Proactive dispute resolution
- Improved ability to identify, track, and monitor abuse
- Better customer experience
Key Changes to the Dispute Process
Changes in terminology
As part of VCR, Visa will be changing some of its dispute resolution terminology. The substitutions include:
- “Dispute” instead of “Chargeback”
- “Dispute Response/Pre-Arbitration” instead of “Representment”
- “Dispute Reversal” instead of “Chargeback Reversal”
- “Dispute Response Reversal” instead of “Representment Rev/Adjustment”
Two New Dispute Processes
Under VCR, Visa has created four new dispute reason categories: fraud, authorization, processing errors, and consumer disputes. These four categories will follow one of two processes: allocation or collaboration.
Disputes falling under Allocation will be those having to do with fraud and authorization issues. In these cases, Visa will be allocating financial liability of the dispute to the merchant and the acquirer. Visa anticipates that the majority of disputes will fall under this process. Merchants should keep in mind that dispute outcomes in the allocation process will be determined by the CVV, AVS, and 3D Secure responses. Merchants who have not enabled these tools will be liable.
Disputes falling under Collaboration will be those having to do with processing errors and consumer disputes (except those related to fraud). In these cases, Visa expects that the merchant and acquirer will collaborate with the issuer by sharing relevant information regarding the transaction to determine which party is liable. Visa anticipates that a smaller number of disputes will fall under this process.
Challenging a Dispute
Under VCR, Visa has shortened the end-to-end cycle for dispute resolution to 30 days. For disputes falling under both the Allocation and Collaboration processes, merchants should respond as soon as possible (no later than 10 days). If merchants do not plan on challenging a dispute they should accept it. The compelling evidence needed to challenge a dispute will not change (merchants should make sure to include if they plan to challenge).
Provisional credit for the amount of a dispute
For disputes falling under Allocation, no provisional credit will be given to the merchant when a dispute is challenged. For Collaboration disputes, however, the process will not change and merchants will receive provisional credit when a dispute is challenged.
Volume of Disputes
Merchants can expect to see fewer disputes after VCR is implemented. Visa will use a new set of business rules to evaluate disputes at the time of creation by the issuer, and will then determine whether or not the dispute is valid. If the dispute is found to be invalid, it will be returned to the issuer and no action will be required by the merchant.
How Can Merchants Prepare for VCR
One of the best steps to take in preparation for VCR is a proactive approach to fraud prevention. Merchants should make sure that they are implementing AVS, CVV, and 3D Secure. Billing descriptors should also be updated so that cardholders can identify charges.
Merchants should also prepare themselves for the new deadlines regarding how long they have to challenge a dispute. In that vein, it is recommended that merchants thoroughly review all of their practices and processes to prepare for the above changes to the dispute process. Make sure to take advantage of the opportunities VCR will afford to improve customer experience.