Based on the information published by NASDAQ, 86% of chargebacks are cases of friendly fraud. The main risks for merchants, in this case, are the following:
- Financial losses
- Ban from accepting Visa payments
- Termination of merchant account by acquiring bank
- Damage to the reputation of the company and its directors
- Merchant’s directors & shareholders may be subject to legal action
The latest chargeback rules set by Visa are the answer to the current fraud and chargeback landscape. In this article, you’ll learn the key takeaways for merchants:
- Visa standard chargeback regulations
- 3 most common Visa dispute reason codes
- New Visa mandate Compelling Evidence 3.0 and its benefits
- Difference between current and new rules of 2023
- Prevent Solution by Chargebackhit
For starters, let’s get on the same page with the terminology.
What is a Chargeback?
A chargeback is a forced refund performed on behalf of a customer. In other words, it returns the payer’s money for a credit card transaction without the merchant’s consent. Chargeback reverses a money transfer from the consumer’s bank account, line of credit, or credit card.
The purpose of chargebacks is to protect consumers from fraudulent business practices. After a customer files a dispute with their bank, the chargeback process begins, and the disputed transaction funds are held until the issue is resolved.
Some of the most common reasons for chargebacks include damaged or defective items, merchants not providing the goods or services on time, buyer’s billing confusion, and criminal fraud.
The origin of chargebacks can be traced back to 1974 when the United States passed the Fair Credit Billing Act. This act sought to make credit card payments more trustworthy by allowing cardholders to dispute fraudulent charges.
While chargebacks can cause numerous problems for businesses, they are essential to modern credit card payments.
What is a Visa Chargeback?
A Visa chargeback is a process by which a Visa cardholder disputes a transaction and requests a refund from the merchant through their issuing bank.
Each credit card network has its own chargeback process, reason codes, and other differentiating details.
Merchants need to understand the unique chargeback processes for each credit card network to deal with them efficiently.
Visa Standard Chargeback Regulations
Visa has a set of standard chargeback regulations that merchants are expected to follow to process transactions and handle chargebacks. Some of the main rules include the following:
- Merchants must have a clear and easy-to-find refund policy on their website;
- Merchants must have a process in place to handle disputes and chargebacks promptly;
- Merchants are responsible for maintaining proper records and documentation to defend against chargebacks.;
- Merchants may be held liable for chargebacks resulting from fraud or other illegal activities;
- Merchants may face chargeback fees, and excessive chargebacks may result in fines or termination of merchant services.
Top-3 Visa Dispute Reason Codes
10.4 Other Fraud—Card Absent Environment – a common friendly fraud reason code, especially when the cardholder doesn’t recognize the transaction on their statement.
12.5 Incorrect Amount – it usually may result from misunderstandings about fees or taxes included in the final price.
12.6.1 Duplicate Processing – a cardholder claims a double charge to their account because a single transaction was processed twice.
Compelling Evidence 3.0. New Visa Mandate
In order to reduce all types of fraud, Visa announced changes to its dispute program. These changes will go into effect on April 15, 2023. The name of the new mandate is Compelling Evidence 3.0.
Compelling evidence is “proof that the cardholder participated in the transaction, received the goods or services, or benefitted from the transaction,” according to Visa’s guidelines.
Benefits of the New Mandate
• Reduces fraud and dispute ratios
• Reduces revenue lost to disputes
• Reduces overall dispute processing expenses
• Drives network value for sellers.
Sellers using VisaNet for payment processing benefit from these services to protect their revenue.
Current and New Rules of 2023 Compared
Prevent by Chargebackhit
An early adopter of the latest Visa mandate – Prevent, a solution by Chargebackhit based on Order Insight & Consumer Clarity. It’s a tool to prevent chargebacks by sharing the transaction details with the issuing bank and the user in real time, without the need for a refund. With Prevent, issuing banks won’t let payers create disputes or chargebacks in cases of friendly fraud. Stay tuned to our updates to learn more.
Eliminate up to 90% of Your Chargebacks & Fraud with Chargebackhit Prevent
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