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Visa Rule Update Might Help Fight Friendly Fraud

ChargebacksPayment ProcessingFraud Prevention

Fraud in the credit card processing landscape has changed since COVID. With more CNP payments happening than ever before, there has been an increase in the number of fraud chargebacks, including “friendly” fraud.

Visa Logo“Friendly” fraud, or Chargeback fraud, occurs when a consumer claims a transaction they made on their own credit card was fraudulent after they receive the service or product purchased. The consumer is essentially using the dispute/chargeback process fraudulently.

According to an article by Kate Fitzgerald published by American Banker, the rate of consumers filing chargebacks is rising – up 35% during the first three quarters of 2022.

“Consumers labeled 70% of payment card transaction disputes as fraud during the first nine months of last year, which aligns with the overall trend of rising unauthorized card fraud resulting from stolen account data and other third-party fraud schemes.

But Sift said 23% of U.S. cardholders it surveyed last year anonymously admitted to participating in at least one act of first-party fraud, presumably in response to the tightening economy”.

Merchants bear the brunt of the cost of friendly fraud disputes – not only in revenue lost but in time lost fighting consumers’ claims. Visa has announced changes to their chargeback rules that might actually help merchants.

In April 2018 Visa overhauled their chargeback rules and implemented their Visa Claims Resolution. Since that time, disputes with Fraud reason codes were only rebuttable at the Pre-Arbitration level and only if the merchant had sufficient “compelling evidence” as defined by Visa.

Beginning in April 2023, per their "Compelling Evidence 3.0" policy, Visa has expanded what is allowable as compelling evidence. The updates aim to allow merchants to prove a pattern of legitimate transaction history to demonstrate the likelihood that a transaction disputed as fraud was actually legitimate.

Bottom line: if you can prove that there were at least 2 legitimate transactions that occurred prior to a transaction disputed for fraud, and your proof meets Visa’s requirements, you should be able to fight and win Visa fraud chargebacks.

To meet Visa’s requirements, per an article by Daniel Rey at PayXpert:

  • The Merchant shall provide at least 2 transactions on the same payment method that were settled at least 120 days prior to the dispute date. Each must be non-disputed and non-fraud,
  • VISA defines 4 core transaction data elements: user ID, IP address, shipping address, and device ID.
    • At least 2 of the above core data elements must match between the provided previous transactions and disputed transactions
    • One of the 2 must be either an IP address or device ID

For our industry, shipping address doesn’t apply and won’t work. Check with your software to see if they pass the other data elements that can help you with fraud chargebacks.

For More Information:

VISA – Evolution of Compelling Evidence – Client FAQs

PayXpert – Visa’s updated Compelling Evidence 3.0 rules


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