A new Visa policy has changed requirements on the amount of evidence a merchant must submit to resolve chargebacks.
Traditionally, cardholders file chargebacks when they believe someone made an unauthorized transaction with their card. But, as Visa internal reporting has found, many cardholders resort to chargebacks even when no fraud has happened.
This chargeback misuse is called friendly fraud, first-party misuse, or first-party fraud. And Visa's internal data has shown that friendly fraud accounts for up to 75% of all chargebacks.
Consequently, Visa has announced changes to its dispute program to help address the said abnormally, and the policy will take effect from April 15, 2023. And they hope to also potentially create more accurate fraud data models, resulting in better authorization decisions, fraud prevention, and other benefits by improving the identification of false fraud claims.
Below we share valuable insights into the Compelling Evidence 3.0 (CE3.0) policy and how to effectively meet the welcoming CE3.0 requirements and prevent chargebacks.
What is compelling evidence 3.0 in simple terms?
Let's start by defining the basic terms.
Visa defines Compelling Evidence as “proof the cardholder participated in the transaction, received the goods or services, or benefitted from the transaction.”
Since chargeback is a consumer protection instrument, it's pretty natural for banks and credit card companies to side with cardholders at chargeback mediation. Hence, providing compelling evidence that shows the cardholder participated in the transaction, received goods or services, or derived some form of benefit from the transaction helps you gain trust from banks when a cardholder files a chargeback. Ideally, the evidence considered to be compelling can include customer communications, proof of product delivery or usage, etc.
And in that order, Compelling Evidence 3.0 is Visa’s way of standardizing the accepted requirements – changing what the company considers compelling evidence.
Under the new standard, the following are compelling evidence merchants must provide:
- Data elements matching previously undisputed transactions
- Number of previously uncontested transactions
- The ages of such previous transactions undisputed
That means, when CE3.0 takes effect in April 2023, compelling evidence must consist of:
- The customer's device IP address or device ID.
- Two primary pieces of this evidence (device fingerprint, IP address and account/login ID, or delivery address) must correspond with previously undisputed transactions.
- Two or more previously uncontested or non-fraudulent transactions within 120 days of the transaction under dispute.
If the merchant meets such checks and balances, the chargeback liability will shift to the issuer.
How do you meet Visa’s compelling evidence guidelines?
CE3.0 is Visa’s way of stimulating openness in the post-purchase eCommerce ecosystem. Such transparency helps to draw a precise and natural relationship between the merchant and the cardholder and prevent unnecessary disputes before a cardholder even attempts to file a case. Below are the steps to take to ensure you meet CE3.0 requirements.
1. Use Visa's Order Insight® to gather and share new remedy criteria for all transactions
Order Insight is Visa's proprietary tool that helps businesses share sales and purchase documentation with banks and buyers at that point of inquiry and in real-time to avoid confusion and stop disputes.
Visa has advised merchants to start gathering CE3.0 remedy criteria, such as customers' shipping addresses, IP addresses, device IDs or fingerprints, and login IDs, to help merchants prepare for the program rollout next year.
Starting early to gather such documentation will ensure that when a customer files a dispute, you have an arsenal at your disposal to combat such dispute. More so, you can better serve your customers by helping them clarify any doubts while preventing meritless chargebacks.
2. Automate post-purchase disputes for better data enrichment
One solid strategy for meeting the CE3.0 stipulations is to stop bad actors from making bad transactions. That's where sufficient data enrichment comes in. If you have insight into the cardholder's buying pattern and digital footprint, you can decide whether to allow or decline the order.
And Chargeflow's chargeback automation solution uses advanced AI, machine learning, and sophisticated in-house fraud prevention solutions to help better identify fraudsters, establish order validity, and win disputes. With such analytics at your fingertips, you can better align your policies to approve only high-trust interactions and decline high-risk orders.
But that's not all.
Chargeflow also brings an extensive, industry-first chargeback response framework that starts where Order Insight ends. This proprietary framework helps merchants craft and send effective chargeback responses that win 2x more disputes. That's how you stay 10x ahead of con artists and beat fraudsters in their own game without lifting a finger.
What are the penalties for non-compliance with Visa Compelling Evidence 3.0?
Penalties for non-compliance with Visa Compelling Evidence 3.0 can include fines, increased chargeback ratios, and suspension or termination of merchant agreements.
How can merchants ensure that their chargeback ratios meet the standards set by Visa Compelling Evidence 3.0?
To ensure compliance with Visa Compelling Evidence 3.0, merchants should regularly monitor their chargeback ratios and implement best practices for preventing fraud and chargebacks. This can include implementing fraud detection tools, verifying customer information, and providing clear refund and cancellation policies.
How does Visa Compelling Evidence 3.0 impact merchants who sell digital goods or services?
Visa Compelling Evidence 3.0 may have a greater impact on merchants who sell digital goods or services, as these transactions may be more susceptible to fraud and chargebacks. Merchants in this industry should take extra precautions to verify customer information and prevent fraud.
How does Visa Compelling Evidence 3.0 affect merchants who operate in high-risk industries?
Merchants operating in high-risk industries, such as online gaming or adult entertainment, may be subject to additional scrutiny and higher chargeback ratios under Visa Compelling Evidence 3.0. These merchants should take extra steps to prevent fraud and ensure compliance with the program's requirements.
What are the key differences between Visa Compelling Evidence 3.0 and previous versions of the program?
Visa Compelling Evidence 3.0 includes new requirements for chargeback documentation, increased fines for non-compliance, and greater scrutiny of high-risk merchants.
How can merchants stay informed about updates and changes to Visa Compelling Evidence 3.0?
Merchants can stay informed about updates and changes to Visa Compelling Evidence 3.0 by regularly checking Visa's website for updates, subscribing to industry newsletters, and speaking with their merchant services provider.