What is Visa Claims Resolution? 5 Things That You Need to Know
by Mike Pullen
What is VCR?
On April 15, 2018 Visa implemented Visa Claims Resolution (VCR). This is their new program designed to simplify dispute resolution and improve the process for handling chargebacks. It aims to resolve chargebacks more efficiently by streamlining and standardizing the way in which disputes are presented, also cutting the timeframes that govern the process.
The updated rules impact all merchants, issuers and acquirers. So, it’s vital that everyone is up to speed and able to comply with Visa’s requirements – ensuring that chargebacks (now termed by Visa as “disputes”) are resolved promptly and satisfactorily.
Why the Change?
Chargebacks haven’t changed much since they were created decades ago. Before VCR, the process for resolving disputes was mostly manual. It involved people filling in and analysing extensive paperwork – with considerable back and forth communication required between issuers, acquirers and merchants.
Consequently, it could take up to 150 days to resolve a single dispute, leading to complaints not just from consumers, but from merchants and issuers too. It’s an open secret that merchants felt the old process was weighted in favour of issuers and consumers, due to the way liability was decided.
With VCR, Visa has made efforts to resolve these old issues. The new procedure is highly automated, with simplified online forms, as well as clear “dispute conditions” to make it easier for merchants and issuers to classify claims.
Meanwhile, liability has been split among all parts of the payments ecosystem. This is designed to make chargebacks fairer, and less punitive for merchants, by giving greater responsibility to acquirers and issuers for ensuring invalid claims don’t slip through the net.
Five Key Things That You Need to Know About VCR:
1. New terminology
Visa has redefined some of the major terms used under the old system. “Chargebacks”, for instance, are now known as “disputes”, while “representments” are referred to as “dispute responses”. In addition, “reason codes” are now called “dispute conditions”.
2. Dispute conditions have been simplified
The old reason codes have been streamlined and consolidated into “dispute conditions”, which have been split into four categories. Designed to make it easier for participants in a claim to classify disputes when processing them, these categories are:
- Fraud: Covering EMV liability shift counterfeit and non-counterfeit fraud, as well as other card present and card not present fraud.
- Authorisation: Including declined authorisation and no authorisation.
- Processing Errors: Covering late presentment, invalid data, duplicate processing and payment by other means.
- Consumer Disputes: Encompassing goods not received, cancelled recurring payments, misrepresentation, cancelled services and non-receipt of cash.
3. Reason Code 75 is no more
I doubt any merchant will mourn Visa’s decision to retire Reason Code 75, better known as “Transaction Not Recognised”, for disputed transactions. Instead, merchants will now likely see more disputes of this kind flowing into the new “Fraud” dispute condition category.
To avoid disputes of this kind, merchants should use a clear payment descriptor for customers’ bank statements, so they can see straight away where the transaction took place and identify whether it’s genuine. Implementing “Verified by Visa” security checks will help merchants confirm that the customer has verified the purchase.
4. Smaller dispute timeframes
Under VCR, the timeframe for merchants to respond has been reduced from 45 to 30 days – this will then shrink to 20 days in 2019. Merchants are encouraged to work with their processor to optimise communication, so they can ensure they have the time and information they need to formulate an appropriate response.
With these tightened deadlines, Visa hopes to reduce the dispute resolution process to as little as 31 days, helping to minimise disruption for both merchants and consumers.
5. Chargebacks are split into two workflows
The new VCR regime has two workflows depending on the nature of the dispute. “Fraud” and “Authorisation” chargebacks will go through the “Allocation” workflow, which involves Visa making automated checks for certain criteria. If any are detected, Visa will block the dispute and shift the liability back on the issuer. For those that pass, the liability shifts to the merchant.
Meanwhile, “Processing Errors” and “Consumer Disputes” will be channelled through the “Collaboration” workflow.
This features a new VCR questionnaire used for both processes, which is much more detailed than the previous iteration, and merchants will need to provide compelling evidence to support their case in the initial response.
Time to get up to speed
By shaking up the way chargebacks are processed, Visa is hoping to transform the way merchants, issuers and acquirers think about disputes (chargebacks), sharing liability more fairly, so they all take responsibility for claims.
To ensure disputes are resolved quickly and effectively, and to minimise the cost of claims, it is crucial that merchants, issuers and acquirers all take steps to update their knowledge of the new VCR system.
In this article, we’ve only scratched the surface. Keep checking in to get the knowledge you need to thrive in this brave new chargeback world.