Ecommerce fraud attacks are still on the rise despite increasingly common antifraud technologies like geolocation, address verification and even biometric technology. In fact, research from The Nilson Report suggests ecommerce fraud will cost merchants globally nearly $50 billion by 2025. Why is this, despite all the advanced security in place?
It’s often because merchants aren’t addressing the right threat sources. For example, consumer chargeback fraud, commonly known as friendly fraud, is projected to be the driving force behind rising losses during this period. However, the new Visa Claims Resolution (VCR) process, which takes effect on April 15, 2018, may change that.
What is Visa Claims Resolution?
Visa suggests that VCR transforms disputes from a litigation-based model to a liability assignment one. The new Visa Resolve Online digital platform seeks to weed out invalid disputes, automate the assignment of liability to merchants or banks and allow for faster chargeback resolution.
Under current rules, banks have between 45 and 100 days to process disputes, compared to just 15 days for merchants. But thanks to the digital processes introduced under VCR, banks can cut that time down to as little as 20 days. Of course, VCR will profoundly impact merchants in many ways other ways.
For example, issuers will no longer be able to file chargebacks using reason code 75 (“Unrecognized Transaction”). Instead, they will need to conduct greater due diligence and collect more in-depth information from cardholders.
That’s good news for merchants, but it’s not all ideal. They will face additional fees if they fail to provide dispute information in a timely manner, while less consistency between card schemes makes errors more likely.
The Impact of VCR
VCR could be a major windfall for merchants, or it could mean higher costs and no substantial reduction in chargebacks. It does not mean an “end to chargebacks,” as some have incorrectly suggested; it merely transforms the process for how disputes are carried out. Its impact depends on whether merchants are ready to adapt.
The new rule set covers everything from how to collect dispute resolution information to the automated and human-centered processes that enable rapid responses, and businesses unprepared for it will lose out. Merchants have more incentive than ever to engage in dispute representations, as the new process restructures outdated reason code models to create a more collaborative process. Without the right strategies, though, they can face even greater costs than under the current system.
The industry-wide lack of preparedness already led to VCR being pushed back once; its original go-live date was back in October. With a month to go until the new live date, I don’t see another reprieve coming.
Get Ready for VCR Now
My advice to merchants and acquirers is to immediately review all existing processes and management strategies, even those partially related to chargebacks. Very few businesses will have ready-made infrastructure that can integrate their processes directly with Visa Resolve Online without taking additional steps.
Every business potentially impacted by VCR should gauge if it has the available systems and resources, or if upgrades are required – especially those who attempt to handle chargebacks in house. Fraud and risk management teams assigned to managing chargebacks should already be in the process of adapting to Visa Claims Resolution. The changes will shake up roles, meaning that some staff reallocation and new training will be necessary.
Alternately, businesses that outsource disputes to a chargeback management and mitigation firm should verify that their service providers are ready for the VCR changeover. That’s a fundamental factor for any business, and neither merchants nor their acquirers can afford to let it go unchecked.