Whilst there is a standard for each card issuer for how to dispute chargebacks as both a merchant and consumer; the wake of coronavirus has forced card issuers such as Mastercard and Visa to release temporary measures to deal efficiently with the upturn in fraud.
How is Visa Responding?
At the same time, revisions to existing fraud schemes through Visa have been suspended through to July in response to the virus.
The Visa Dispute Monitoring Program (VDMP) and Visa Fraud Monitoring Program (VFMP) are schemes designed to discredit fraud with additional fees and restrictions on merchants who repeatedly fail to mitigate fraud and chargeback disputes within a specific margin.
However, given the unprecedented circumstance wherein fraud is on the rise and profitable income is declining, Visa has suspended these monitoring parameters for merchants whose MCC codes fall under struggling verticals such as the travel and entertainment industries.
The Visa Acquirer Monitoring Program (VAMP) is also suspended for these same merchants.
Any merchants whose MCC codes fall outside of these verticals can still seek support from Visa through their regional risk teams by requesting that they have their VDMP and VFMP fees suspended and/or waived.
To do so, you must demonstrate:
That your business has been directly impacted by COVID-19.
Demonstrate the material need for the suspension of any fees connected to the schemes.
It is important to note that Visa is under no obligation to grant this to merchants.
The Rise in Fraud:
Whilst data from our payment gateway showed a year-on-year increase of retail transactions of 74% from March 2019 to March 2020, data provided by Visa showed an increase in sales online by 21% since lockdown measures began. As a result, March alone saw a 13% increase in fraudulent activity when compared to the same month in the year prior. As the effects of coronavirus have only just begun to translate into losses in the economy, this same study revealed that within one month, the UK was subject to more than £800,000 in losses due to fake products and scams produced by bad actors in the market.
A study conducted by chargebacks911 found that 84% of merchants believed that COVID-19 would have a significant effect on e-commerce with second-hand ramifications only just beginning to ripple through the market.
How Are Chargebacks Rising?
Whilst criminal fraud is a concern - as coronavirus affects countries at different rates and levels - the following can lead to a rise in chargebacks for months to come, especially given the 120 days in which merchants have to raise a dispute:
- Interrupted supply chains from closures, trade bans and sickness:
This can limit orders and inventory and ultimately lead to cancellations where existing customers can either be lost to other suppliers or angered from the negative impact on your customer service.
Smaller workforce: This will have a knock-on effect on the level of service your business can provide and the resulting customer service you provide; including the ability to resolve any grievances.
Delivery times: Whilst this may be out of your control, your consumer may consider you at fault when a courier cannot fulfil your delivery in time.
Increased Spending: Whilst online spending is increasing, can you fulfil the demand for an increased amount of orders with a limited workforce?
How is Mastercard responding?
As part of the Mastercard Dispute Resolution Initiative, Mastercard seeks to phase out the arbitration chargeback cycle wherein Mastercard will be asked to resolve a chargeback dispute when an agreement cannot be reached elsewhere. In April of this year, Mastercard sought to optimise the chargeback process for most disputes, requiring a pre-arbitration to be filed pre-emptively. Mastercard will also suspend any assessments normally made in relation to its Excessive Fraud Merchant Compliance Program (EFM) until November 2020 (for violations made in October 2020) whilst continuing to identify e-commerce merchants with excessive fraud behaviour.
As a certified Mastercard Partner, Total Processing is proud to offer its Total Defence chargeback service. Working in partnership with Mastercard, part of our Total Defence service includes a chargeback alerts service. These alerts are aimed at raising potential disputes to merchants before they can escalate into a chargeback. The use of these alerts has shown a 15-30% reduction in calls from consumers to banks about transactions, where chargebacks can be raised intentionally or because of friendly fraud.
Our chargeback alerts service is offered free of charge through to the end of June.
A secondary feature of Total Defence includes our chargeback defender service. Our intuitive chargeback defender compiles your chargeback rebuttal alongside transactional data from our payment gateway and issues it to the acquiring bank all within our Total Control CRM; where you can track the status of your dispute.
Taking Further Action:
Additionally, Visa has launched a substitute COVID-19 dispute monitoring program that launched on April 1st, 2020. With the aim of maintaining ‘the integrity of the dispute process by reducing invalid disputes initiated into the system,’ it is again, travel and entertainment merchants who are thought to benefit initially from this program - but Visa is looking to include other affected verticals such as the expanded lodging, transportation, and airline services.
The new program will monitor daily dispute volumes provided by issuers and look for patterns that are inconsistent with Visa’s current dispute rules - this includes issuers who provide more than 50 disputes in one day. Issuers flagged through this program will have 3 business days to reverse any invalid disputes or face non-compliance assessments or face losing their right to file consumer disputes in the future.
Our guide to mitigating chargebacks, details Visa and Mastercard’s individual monitoring programmes and dispute processes. Despite the amendments made in the wake of the coronavirus, this guide provides key insight into how higher revenues can be maintained and protected – especially within the e-commerce space – by using a third-party provider.
Total Processing is not only an official partner of Mastercard, but protects their merchants with their propriety fraud protection suite via their payment gateway – protecting you against chargebacks.
With our help, businesses will have real-time control over chargeback disputes and compliance measures with our assistance in reducing your chargeback ratios.
Download our guide today or get in touch to learn more!