By any measure, if Visa can trim more than two weeks off a chargeback dispute, it should help merchants and cardholders. But like many efforts to improve the payments market, it won't be an easy change.
Starting April 15, Visa Claims Resolution becomes a mandatory process, using automation and other factors to cap disputes at 31 days to a resolution — a significant improvement over the current average of 46 days.
Like any change in card brand rules, the VCR requires some tweaks to merchant technology — and these changes may be overshadowed by the concurrent end to the requirement of signature authorization at the point of sale.
"The promise of VCR is that it will reduce chargebacks, simplify chargeback reason codes, and in the end remain at least cost neutral to the merchant from a fee standpoint," said Laura Townsend, senior vice president of operations at the Merchant Advisory Group. "However, until merchants and acquirers are able to adequately test VCR with production data and analyze the cost implications for merchants, they are not able to firmly state those benefits will be realized."
Still, the merchant community wants to see improved dispute management processes and costs, and remains hopeful that will be the case, Townsend added. "We just cannot confirm at this time, that will be the outcome."
Visa says it will identify and block disputes that do not meet criteria for the selected dispute category, which will immediately reduce costs and handling efforts for acquirers, merchants and issuers.
The VCR aims to resolve disputes faster through an automated process and shorter response time frames, and will also simplify the process in an attempt to reduce complexity and system errors. In doing so, Visa has created an automated guide for users and consolidated all dispute reasons into four categories — fraud, authorization, processing errors and consumer disputes. That's down from 22 previous categories.
The process operates as a back-office function and is not designed to impact VisaNet or normal processing of Visa transactions.
But merchants see a fair workload ahead to prepare properly for VCR.
"Unfortunately, the callout for the industry here is that this is another example of good intentions but the lack of industry preparedness to support an implementation of this scale leaves the merchant ill-prepared," Townsend said.
Implementation of the VCR program requires a significant number of technical modifications to acquirer systems with additional operational implications to acquirer services, she added.
Merchants respect the value to consumers of dispute resolution as quickly as possible and support reducing the current dispute response time frame, Townsend said. But merchant groups and Visa may lock horns again in the future if merchants who process manually can't achieve a more aggressive time frame are charged fees for non-response to claims, she added.
The chargeback issue has created its own cottage industry of sorts as companies like Chargebacks911 and Chargeback Gurus have surfaced to help merchants better understand what is happening with their chargeback rates, how much it is costing them and how often they win a claim with the card brands. Those companies operate on the premise that merchants too often throw up their hands, don't pay much attention and just look at chargebacks as a cost of doing business.
Most card brands require that a merchant's chargeback rate be less than 1% of monthly transactions to begin with, but taking into account the number of merchants overall, it still equates to hundreds of thousands of chargeback disputes handled monthly.
"We appreciate anything Visa and acquirers can do that will give merchants more time to test and evaluate the impact of VCR," Townsend said. "The outcome should be a good one if the promise of VCR is true."