Visa Claims Resolution (VCR) Part-I !!

Visa announced the Visa Claims Resolution (VCR) initiative to improve the dispute process.

VCR is Visa’s new system to help reduce timelines and simplify dispute resolution for issuers and acquirers. This is a mandatory change for all issuers and acquirers.

On April 15, 2018, Visa’s new rules on chargebacks, called Visa Claims Resolution or VCR came into effect. This new program has already gone live in Hong Kong and New Zealand in October 2017. Now these new rules will be migrated to all the remaining countries.

The main reason for Visa to change the existing chargeback rules was to simplify the dispute process whilst reducing not only the overall number of chargebacks but also the time to resolve these chargebacks.

Benefits:

VCR will have the following impact on the dispute process:

  • Simplify the dispute process by collapsing 22 chargeback reason codes to only 4 dispute groups
  • Streamline existing workflows by reducing the number of chargeback reason codes from 22 to 4:
    • Fraud
    • Authorization
    • Processing Errors
    • Consumer Disputes
  • The dispute timeframes will be reduced to provide a quicker resolution, meaning resources will be in limbo for a shorter period of time
  • The Merchant Process Inquiry will be beneficial, as the cardholder will receive details of the transaction at the first point of contact. This will reduce the number of first-cycle chargebacks submitted and representments received
  • Financial institutions will be able to eliminate invalid disputes using existing data and applying automatic, real-time liability assignment
  • There will be less chances of error through prepopulated transaction data, increasing the ‘right first time’ ratios
  • Help reduce abusive and “frivolous” usage of chargeback/claims system, lowering dispute volumes
  • Simplify the definition of specific documents and evidence required to support claims
  • Provide a better customer experience with shortened timelines for the dispute resolution.

 Does Any Terminology Change?

Yes; the basic vocabulary associated with the dispute process will change under VCR:

Current Defined Term  New Defined Term
Chargeback Dispute
Representment Dispute Response/Pre-Arbitration
Chargeback Reversal Dispute Reversal
Representment Rev/Adjustment Dispute Response Reversal

How it works:

Visa Claims Resolution was designed to change the process from a litigation-based model to a liability-assessment model:

 

  • Visa consolidated the existing 22 chargeback reason codes into four new groups,
    It turns out that one of the most used chargeback
    reason codes, ‘RC 75 – Transaction not recognized’, will be discontinued. Visa now requires the issuers to use the existing data in the Visa portal to assist the cardholder to recognize the transaction instead of disputing the transaction immediately. This represents a clear advantage for the merchant but could probably lead to increased chargebacks in the new fraud group. One key message for merchants to avoid disputes would be to communicate with the end-customers before issues arise.
  • Visa will be stricter on chargebacks from the same credit card. For Card-Not-Present transactions, Visa will now only allow 35 fraud chargebacks from the same credit
    card within 120 days.
  • A big change for merchants is the reduced timeframe for their response to disputes. Instead of the current response time limit of 45 days, Visa cuts this dispute-window by one-third to only 30 days and in 2019 Visa plans to reduce the 30-day window to 20 days. Merchants should be aware that the response time limit includes the reaction time of both the acquirer and the merchant, this could result in the merchant having a limited timeframe to response appropriately to the chargeback
  • Two new workflows were created to process disputes which shortened the communication between end-customers, issuers, acquirers and merchants. These two are Allocation workflow and Collaboration workflow.

 

We will continue on these two workflows and some more details in our next article, stay tuned!

Nitin Sharma

Nitin is Senior Consultant @ Verinite. Passion to learn about Cards and Payment domain. Loves to travel and explore nature a lot.