It might be too early to determine the full impact of the new
Most alarming, possibly, is that nearly 30 percent of merchants also reported an increase in chargebacks and another third had not even heard of the program, according to a VCR initial impact study by chargebacks management firm Chargebacks 911. A third of merchants say they experienced a decrease in transaction disputes shortly after the program was implemented.
Chargebacks 911 surveyed hundreds of e-commerce and card-not-present merchants of various sizes last summer in compiling the assessment for the first few months after Visa made claims resolution a mandatory process in April. Visa declined to comment about VCR's first months in operation for this article.
Visa proposed VCR as a measure to simplify the dispute resolution process, citing client feedback that said the current system was too complex, lacked transparency and takes too long to resolve disputes. It was designed to get Visa more involved in the process by identifying and blocking disputes that did not meet criteria for selected dispute categories, while also reducing costs and handling efforts for acquirers, merchants and issuers.
Automated decisions and shortened response time frames were established, creating a 31-day limit or less as a standard. In seeking that goal, Visa also trimmed the dispute categories down to four, from 22, while also introducing an automated user guide to smooth out workflow.
The impetus behind VCR and changes implemented by other cards brands related to chargebacks generally are not about improving security, said Julie Conroy, research director and fraud expert with Boston-based Aite Group.
"I think the goal is to try to eliminate a lot of the noise and game-playing that currently is the hallmark of chargebacks," Conroy said.
Some merchants will try to present 100 percent of chargebacks "to see what sticks," and some issuers will decline on a technicality regardless of compelling evidence, Conroy said.
"This dynamic creates a lot of extra work and expense for everyone," she added. "Early market feedback that I’ve heard is that the changes the networks are making represent an initial step in the right direction toward making chargebacks more efficient and equitable, but there’s a long way to go."
So far, VCR is receiving a fairly lukewarm response from merchants. Sixty-eight percent of merchants surveyed said VCR had at least "some" impact on the chargeback process, with 60 percent of those saying it was about what they expected.
On a positive note, of those merchants who have seen a decline, 79 percent say the decrease has been sustained or even improved over time.
But 42 percent said winning chargeback disputes was now more difficult, and another 44 percent felt the degree of difficulty had not changed. In what might be more troubling for Visa, only 23 percent felt that VCR has made the chargeback process better, while 38 percent felt it made the process worse.
The merchant's experience likely would depend on the size of the merchant and the ability to follow the timeline for faster dispute resolution under VCR, said Mark Horwedel, president of the Merchant Advisory Group.
"Some of the bigger merchants will have the capability to ramp up to meet the faster response times and many have automated systems," Horwedel said. "But for the smaller guy who keeps paper receipts in a bank box, this is going to be horrendous."
Those smaller merchants take the risk of being fined for not meeting VCR timelines, so the program may not be a significant benefit to them, Horwedel added.
Indeed, the research noted that 70 percent of merchants said they were having a hard time adjusting to the reduced dispute response time frames. As many as 40 percent of merchants had no idea there were fines for not responding to the chargeback in time.
From the merchants' standpoint, Mastercard's move to
Prior to that change, merchants would be stuck with the chargeback if they could not produce a receipt with a signature. But now, if a transaction has authorization, the issuer cannot decline the chargeback.
Visa has been pushing its Visa Merchant Purchase Inquiry system to help merchants deal with customer complaints regarding transactions they do not recognize. It essentially connects merchants and issuers quickly to exchange information about such transactions and resolve before they become chargebacks.
However, only 13 percent of merchants reported implementing and using the Visa Merchant Purchase Inquiry. Another 25 percent plan to implement the process in the future.
"Overall, there was little consensus on specific friction points in the new system," the Chargebacks 911 report concluded. "A few merchants were vehement in their attacks on VCR, and a few claimed no real problems with the new system at all."
Miscommunication was a recurring theme, whether it was between the merchant and processor, merchant and issuers, or even directly with Visa. The majority were "wrinkles that could be corrected in time," the report said.
Ultimately, a key reason merchants aren't embracing VCR is lack of knowledge about it, despite having information months ahead of time, the report noted.
