The constant evolution in the payment’s ecosystem requires major card networks like Visa to change their regulations to protect cardholders from fraud and cybercrime. 

Visa has updated rules that acquiring banks, merchants, and registered ISOs must follow. These regulations will help merchants reduce fees and chargeback liability. They can also protect merchants’ revenues from avoidable losses. 

The goals of the new rules are to:

  1. Reduce the time in the chargeback process if a transaction is in financial limbo
  2. Ensure the chargeback rules govern the dispute process
  3. Enhance the clarity in the process of a chargeback can and will be reversed
Visa created a new data-driven management system that automatically identifies and blocks conflicts

New Data-Driven Management System strives to Reduce Invalid Disputes in new chargeback rules

To reduce invalid disputes, Visa created a new data-driven management system that automatically identifies and blocks conflicts that don’t follow the required criteria for a standard dispute category.

But what are the required criteria in visa’s new chargeback rules?

The answer is different based on the nature of the dispute. Visa will enhance the use of existing data while reserving the right to request additional information to improve the outcome of a dispute.

Visa will determine whether the issuer provides enough information for a chargeback based on the collected data. If not enough data is collected, the case will not be passed to the merchant. In the case that the data from the issuer meets all required criteria, the chargeback will be initiated and sent to the merchant to gather additional information about the purchase, which only the merchant can access, such as purchased details, shipping information, or device information.

Visa’s New Chargeback Rules will Apply 3D Secure globally

3D Secure 2.0 is a powerful tool that helps prevent fraudsters from stealing card data and making purchases.

While 3D Secure 2.0 is not mandated, but strongly encouraged based on its fraud reduction benefits. However, access to this protection depends on issuer participation and whether or not the transaction is fully authenticated.

Less time to dispute chargebacks

The new timeframe to respond to chargeback will be shortened to 30 days, compared to 45 days in the current process. Although the time to respond to a chargeback can vary, it is safe to assume that the timeframe will be shorter than 45 days.

Therefore, it is recommended that merchants have an automated or semi-automated way to respond to chargebacks.

Visa Decline Response Code Rules Changing

There are 22 chargebacks reason codes under the legacy Visa Chargeback System. Under the new rule, there will be four categories, including:

  • Issuer will never approve. When merchants get permanent declines, they never get permitted, and the response will never change. 
  • Not approved at this time. This status can change over time, and reattempts are permitted
  • Data quality issue. If the transaction has an invalid account number, expired card, or incorrect CVV, it will be declined. A reattempt action is permitted, but the payment data should be validated first. 
  • Generic response codes. All other codes fall into this category. The reattempt action is permitted. 

Merchants should track these codes for business intelligence to better understand why a chargeback is filed towards your company.

Reduce Invalid Disputes

In the most recent analysis, Visa identified around 5 million invalid disputes, which accounted for approximately 15% of all chargebacks, in their system. Although merchants and/or processors reversed most of the cases throughout the dispute process, these chargebacks can be done in errors and cost merchant revenue.

Merchants and issuers are strongly advised to use Visa’s new system, providing the exact transactions being disputed. This step allows chargebacks to proceed to the merchant if they have specific criteria.

In conclusion, the new regulations from Visa promise to reduce dispute volume, identify, track and monitor chargeback abuse, and overall increase customer experience.