VCR: Dealing with the Demise of ‘Transaction Not Recognized’
by Mike Pullen
Last time, I took you through some of the terminology changes Visa brought in with Visa Claims Resolution (VCR). Hint: it's goodbye ‘chargebacks', ‘reason codes' and ‘representments'.
Now, I want to put some of the meatier updates under the spotlight, to get to the bottom of the changes and explain how they'll impact your business. First up for our attention: the retirement of Reason Code 75.
Why the change?
In April, Visa said goodbye to ‘Transaction Not Recognized' as part of a wider shake-up of the reason code system – which, as I explained in my last blog, are now known as ‘dispute conditions'.
Under VCR, the 22 traditional reason codes have been sorted into four new dispute condition categories. This makes it easy for merchants to see (at a glance) why the dispute is taking place – so they can take the right action.
Reason Code 75 overlaps with a few of the new dispute conditions under the ‘Fraud' category, so getting rid of it makes sense – it's a way of simplifying the dispute process. Why have so many codes, when just a few will do?
This code was sometimes used by consumers to fraudulently claim back money they had paid out for genuine purchases (aka friendly fraud/false disputes). Hopefully, getting rid of it will lead to more investigation being done up front to truly determine where the dispute should reside – in turn leading to fewer cases of false disputes in the future.
The consensus is that the now retired ‘Transaction Not Recognized' disputes will flow into the ‘Allocation' workflow – leading to an increase in fraud related chargebacks (such as ‘10.3 Other Fraud-Card Present Environment' or ‘10.4 Other Fraud-Card Absent Environment'). In speaking with merchants post VCR implementation, this is so far holding true.
Each of these conditions covers a specific, clearly defined type of fraud to ensure you know exactly what the issue is so you can investigate and get to the bottom of things for your customer.
One thing to remember with ‘Allocation' disputes (fraud related), is that you as the merchant have only one response available to present all your compelling information – so it's critical that it contain all relevant data to support your claim. The only other option available should the issuer decline the dispute is for your acquirer/processor to file an arbitration case at a cost of $500.00. For most, this is cost prohibitive unless you have a high dollar transaction to be fought.
How can I avoid disputes?
There are several simple steps that merchants can take to minimize the risk of fraud disputes taking place.
Using clear payment descriptors for customers' bank statements will mean that consumers can quickly see what the transaction was for and where it took place when looking over their monthly bill – reducing confusion.
Making sure your payments process includes Verified by Visa security checks is important as well – this way all transactions must be verified and validated by the cardholder, minimizing the risk of fraud.
Finally, if customers still have issues with a transaction, you need to make sure you deal with the issue promptly and give refunds quickly where warranted. This will help you ensure the problem doesn't escalate and doesn't get referred to Visa as a dispute claim. This can be done through a chargeback/dispute warning system like Ethoca Alerts.
To tackle friendly fraud and customer disputes at the source (before they ever become chargebacks), next generation collaborative solutions like Eliminator are your best bet.
Knowing is half the battle
The dispute conditions might be different, and ‘Transaction Not Recognized' might be no more, but that doesn't mean you can sit back and relax.
Chargebacks (or as we should now say, ‘disputes') are bad for business – especially when they're driven by friendly fraud. It's vital that you keep up to date with all the ongoing changes to make sure you're protected.
If you need to know more about VCR and what it means for your business, you can catch up with our in-depth webinar on the subject, ‘What You Don't Know About Chargebacks Can Hurt You‘. For more personalized support, you can get in touch with our experts today, or apply for a free chargeback assessment.