Author: Tom-Chris Emewulu
Digital Evangelist

TC40 data reports are documentation filed by issuing banks when a buyer contends that a charge on their bill is fraudulent.

Are you running an online business?

Let’s, assume a situation:

  • The company begins to experience a spike in payment declines.
  • That causes unhappy and confused customers to call their issuing banks. They had enough credit to cover the purchases, so why couldn’t they complete the transactions?
  • The banks tell these customers the merchant was associated with fraud, and the charges declined for their protection. The customers wanted to pay and had funds to pay, but their bank was not letting them, frustrating both the customer and the merchant.
  • A look into the decline logs shows that several issuers declined all transactions.
  • The company eventually found, through one of the card brands, that the declines were due to a TC40 data report.

If you’re a merchant with no clue of the existence of TC40 reports, this is a scenario you could very quickly face. Read on to gain more valuable insights into the TC40 data claim report.

We shall answer essential TC40 data FAQs such as:

  1. What are TC40 data reports, and how does it work?
  2. How do TC40 reports affect a Merchant's account?
  3. Can TC40 reports prevent a merchant from accepting online payments?
  4. How do you know if TC40 reports are impacting your business?
  5. Where can a merchant find its TC40 Report?
  6. Is a TC40 report the same as a chargeback?
  7. How to use TC40 data reports to prevent chargebacks

Let’s dig in!

What is TC40 data report? And how does TC40 data report work?

TC40 data is documentation collected by a credit or debit card issuing bank each time a cardholder claims a specific transaction posted to their bill is fraudulent.

A TC40 report is a form banks use to transmit the TC40 data to credit card payment companies (such as VISA and MasterCard) to note all reported fraud incidents tied to the merchant. By doing this, every instance of fraud is notified and connected to the merchant's account.

Visa and Mastercard gather and use these reports as part of their fraud management initiatives.

Every brand has its compliance strategy. Mastercard employs the Fraud and Loss Database (FLD), superseded by The System to Avoid Fraud Effectively (SAFE) program in October 2020, while Visa uses the Risk Identification Service (RIS). TC40 is part of Visa's RIS protocols.

They add the raw data for each reported transaction in the reports, including:

  • Merchant information
  • The participating bank's details
  • Detailed information about the transaction allegedly fraudulent

Again, the information gathered enables banks to spot businesses with abnormally high fraud rates and take the necessary precautions to reduce such risks. Merchants must know that if RIS or SAFE deems them "high risk," they lose their chargeback protection until they take the necessary action to resolve the problem.

How do TC40 reports affect a Merchant's account?

TC40 reports can have a significant impact on a merchant in different ways. For starters, the data used in TC40 and SAFE reporting goes into determining a merchant's fraud risk exposure.

When merchants have significantly high fraud levels, such data help determine those who qualify for interventions like the Visa Fraud Monitoring Program. Visa derives the metrics they use to underscore merchants with high or excessive frauds (i.e., the overall monthly fraudulent transactions value and the monthly ratio of fraud dollars to sales dollars) from TC40 reports, not from chargebacks.

This documentation can be valuable to merchants, as one can analyze them for insights to enhance fraud and chargebacks risk management strategies. Yet, TC40 and SAFE reports are not a silver bullet for chargeback mitigation for various reasons:

  1. Accessing TC40 and SAFE reports can be pretty tricky.
  2. There's no guarantee you will obtain the reports on time.
  3. The data is predominantly predicated on cardholders self-reporting fraud on their accounts, creating the possibility of inaccurate information getting captured.
  4. Premeditated chargebacks, such as friendly fraud, which accounts for ~70% of all chargebacks, will be omitted entirely from the documentation.

With that in the note, it's still advisable to contact your acquirer to see what information you can get. These reports could potentially hold some water for potential fraud and chargeback defense strategies. That is if you comb through the data and evaluate them to fit chargebacks to their root causes and identify the tools to help you avoid similar cases in the future.

Can TC40 reports prevent a merchant from accepting online payments?

Yes; if a merchant receives an excessive number of TC40 reports at their store, even if a smaller percentage of those resulted in chargebacks, it can damage their ability to receive card-not-present payments.

Banks frequently use TC40 reports to construct and evaluate a merchant’s risk profile before executing payment transactions initiated by cardholders. TC40 data captures every known fraud instance against a merchant. Thus, giving banks insight into the frequency and severity of a merchant's alleged fraudulent activities.

The precise calculations and thresholds are not always known. However, it's common knowledge that an uptick in a merchant's fraud claim volumes is directly proportional to the likelihood of banks seeing such a merchant, not the cardholder, as the fraud culprit in the transaction. Banks can deny customer payments to such merchants, making it impossible for the business to process payments from genuine buyers. Hence, high TC40 report volume is synonymous with an increased risk profile.

How do you know if TC40 reports are impacting your business?

Vendors cannot request periodic disbursement of TC40 data claims, as neither acquirers nor processors are obligated to distribute such data to merchants. Nevertheless, the following best practices can help you check to see if TC40 data claims are impacting your business:

  • Research Low-Ticket Transactions

Investigate your payment decline log. Separate the declines by an issuer to determine if any issuers are declining almost all transactions. Review decline reason codes, though most use “general decline” in these cases.

  • Track customer calls

If you see a spike in customers saying their cards were declined, but they don't know the reason, that could be a smokescreen for excessive TC40 reports.

  • Contact your processor

Reach out to your processor to see if they track TC40 volume. If they don’t, they may be able to contact the card networks on your behalf to determine if this impacts your business.

Where can a merchant find its TC40 report?

While these reports are used primarily by issuers and card networks to assess merchants' fraud risks, TC40 is also passed on to the merchant’s acquirer or processor, typically daily.

The processor's discretion is whether the merchant has access to this report. And that discretion can be difficult to come by, but it is the first place a merchant should look.

Another place to look for this Report is with services that partner with issuers to offer “chargeback alerts.”

Is a TC40 report the same as a chargeback?

While TC40 reports originate from the data collected every time a cardholder alleges fraud, a TC40 data claim is NOT the same as a chargeback.

Suffice it to say that the TC40 report has all the relevant documentation one requires for filling chargebacks. Initiating the chargeback is a distinct process.

We draw the reader's attention to the fact that a chargeback is primarily an attempt by the customer's card issuing bank to reverse the proceeds of a transaction from a vendor. When a cardholder files a chargeback against a merchant, the vendor will receive an alphanumeric code that signifies the reason for the chargeback on their merchant statement.

However, TC40 reports compile a cardholder's allegations of fraud against a merchant. Such documentation does not have requests from the issuing bank to be made whole attached to it.

For instance, a TC40 report can be generated but no chargeback filed. That's especially true in small dollar value transactions because the cost of initiating the chargeback often exceeds refunding the cardholder directly.

How to use TC40 data reports to prevent chargebacks

To be effective, you must research each claim, matching it up with the account information in the merchant database. These transactions should be marked as fraudulent and probably refunded to avoid a chargeback if genuine fraud occurred.

While you may end up refunding transactions that do not result in a chargeback, the benefit of acting upon this data could be invaluable.

Hence, you can use TC40 for fraud preventive measures.

The faster you can mark these transactions as fraudulent in your system, the quicker your business can identify and prevent similar fraud. When a fraudster finds a way to get through, they exploit the vulnerability as long as it is present, resulting in a high volume of fraud.

But like most merchants, you already know that's an aspirational proposition that does not always see the light of day.

Automating your chargeback with Chargeflow gives you a more-excellent strategy for stopping fraud and recovering disputes without lifting a finger.

Average Dispute Amount
Average Dispute Amount
$
30
# Disputes Per Month
# Disputes Per Month
#
50
Time Spent Per Dispute
Time Spent Per Dispute
M
20
calculation
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
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