The introduction of the Visa Claims Resolution initiative (aka, VCR) in April 2018 was heralded as a significant development for the payments industry. However, almost six months from its launch, the impact on merchants has been minimal—and many suggest the chargeback process has only become more challenging.
VCR was designed to streamline and simplify the chargeback process, reduce instances of chargeback fraud and standardise the system for processing claims. The changes were flagged to merchants and banks well in advance of their introduction, yet more than one-in-three of the merchants surveyed by The Chargeback Company said they were unaware of VCR.
Of those that were aware of the changes, 38% felt it had made the chargeback and dispute process worse, while 23% said it had made it better.
More than one-third of merchants were unaware that they faced additional fines if they missed the new, shorter deadlines for responding to claims—and nearly 85% who were aware report responding to (and thereby accepting) any valid chargeback dispute. This also led to additional management costs and related inefficiencies.
The Chargeback Company’s study concludes that merchants are managing payment disputes more proactively as a result of Visa’s new penalty and fee schedule. However, seven out of ten merchants report difficulty in adjusting to the reduced time-frames, considering their manual process of compiling cases has not changed despite dramatically shortened time-frames.
To improve the efficiency and minimise the sheer quantity of payment disputes, The Chargeback Company recommends implementing Visa’s Merchant Purchase Inquiry (VMPI). This is a function that aims to speed up dispute communication by providing merchants with an opportunity to work with their bank or a licensed facilitator to supply additional data to Visa. Only 13% of merchants surveyed were enrolled.
From the supplementary data and proactive feedback, issuers can offer evidence-backed explanations for unjustified disputes and forego the process of a chargeback altogether. With a low number of merchants relying on the additional tools to manage their disputes, increased education here could prove beneficial.
“VCR is a step in the right direction when it comes to combatting wrongful chargebacks and friendly fraud, but merchants need much more support,” says Monica Eaton-Cardone, CIO and co-founder of The Chargeback Company. “Without support, merchants will be worse off than before the initiative came into play, hit by shorter timeframes and additional fees. The equation isn’t balanced – this is the primary issue.”
There are a number of variables that will affect VCR’s success—the extent to which other card schemes follow Visa’s lead being one of them. For now, Visa’s biggest challenge is making sure merchants and processors have a clear understanding of what VCR is and how it can protect a merchant’s bottom line.