VCR is Visa’s most recent process for resolving chargebacks took effect in April of 2018. Ultimately, Visa came to the realization that the process they had in place for years was completely out of date and needed to be simplified. Thus, it put VCR into effect to simplify and streamline the process. It is also more cost-effective and relies heavily on automatic technology.
There were substantial changes made, and we think it important that every merchant is aware of them and what they mean for the overall process.
#1 – The timeframe for merchant responses was changed from 45 to 30 days, as Visa decided the process was too drawn out in an age where things should move much faster.
#2 – Some invalid chargebacks are now automatically rejected before processing is complete. Visa concluded that there were numerous claims that should have been rejected before they got into the hands of banks and merchants.
#3 – Instead of Visa using 22 reason codes for chargebacks, there will be four dispute categories. This greatly simplified the process.
#4 – There are two workflow tracks that all cases are routed through. These include an automated workflow and a collaborative one that largely resembles the old chargeback workflow.
#5 – Merchants will only be able to challenge authorization and fraud chargebacks, but they must have extremely clear and definitive evidence. Visa officially refers to this evidence as “compelling evidence.”
The cardholder calls his or her bank to dispute a recent transaction.
A customer service representative for the cardholder’s bank requests data from Visa Resolve Online (VROL) to make sure the transaction was valid.
The bank decides if the dispute is valid or invalid. If the dispute is deemed invalid, the dispute request process will end.
If the process was deemed valid, the bank will select a dispute category. The dispute category will determine the dispute workflow.
The process will either be pushed into the “Allocation” or the “Collaboration” workflow, depending on the assigned category.
The Allocation workflow is automated, while the Collaboration workflow is a collaborative effort between the cardholder’s bank and the merchant.
A) If the Allocation workflow is chosen, Visa’s automated technology assigns liability to either the issuer or merchant. It will also determine if a dispute will go to arbitration.
B) If the Collaboration workflow is selected, the cardholder’s bank and merchant will share information. The goal is to resolve the dispute in a timely and efficient manner. If the bank and merchant agree on the dispute, the process will be concluded. If not, arbitration is filed with Visa.
As mentioned in step 6, arbitration is the last step. During this phase, the merchant’s supplied proof (that the customer’s card was correctly changed) is key. Lack of sufficient evidence will lead to the chargeback standing in the final decision.
Visa has officially phased out the word chargeback and has replaced it with dispute instead.
Visa also phased out the word representment and replaced it with the term dispute response.
A card holder initiates a dispute and the issuer submits a transaction inquiry to Visa Resolve Online (VROL) to decide which transactions should be challenged.
Visa responds to a transaction inquiry with a set list of transactions (such as adjustments, reversals, previous credits, and more) that could lead to the dispute being invalidated.
There are four dispute categories now that include fraud, authorization, consumer disputes, and processing error.
A workflow that VCR introduced that allows Visa to automate the process of determining whether or not a chargeback should be upheld or not.
If needed, the collaboration workflow will be used. It harkens back to the old process that was used in which a cardholder’s bank and a merchant collaborate together to get to the bottom of the issue.
Where allocation disputes are concerned, there isn’t an opportunity for merchants to submit a dispute response. Instead, merchants can ask for pre-arbitration in cases of fraud and authorization issues. Merchants are required to offer compelling evidence in this phase of the process.
The VCR process was an opportunity for Visa to make the lives of everyone involved easier. You can expect as the years progress that the use of automated processes will increase and hopefully everyone will benefit from their benefits. On the same note, it’s important that all parties all realize that sometimes collaboration on a personal level (between consumers, banks, merchants, etc.) is important and unavoidable.
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