Digging into the Visa Chargeback Monitoring Program

Gone are the days of cash being king—now customers want to pay with their credit cards. In fact, the number of people paying with credit cards continues to increase year-over-year. A 2016 survey by TSYS of a 1,000-person survey found 40% of shoppers prefer credit cards, 35% prefer debit cards, and 11% prefer cash. These numbers indicate how and why it’s important for merchants to be up-to-date on the latest information from the major credit card companies.

The Visa Chargeback Monitoring Program is designed to support merchants in preventing chargebacks, but it can be a challenge to stay on top of the updates to the program. To help make things easier, we’ve put together an overview of the Visa Chargeback Monitoring Program. We recommend that you download the Chargeback Management Guidelines for Visa Merchants and the Visa Core Rules and Visa Product and Services Rules to make sure you have the latest information found in these important documents.

What Is a Visa Chargeback?

Visa defines a chargeback as a process that “provides an issuer with a way to return a disputed transaction.” In its documentation, Visa emphasizes three key reasons for why transactions result in a chargeback:

• The merchant did not get authorization for the transaction
• The merchant did not collect a card imprint for electronic or manual sales
• The merchant accepted an expired card

Rest assured that there are end-to-end solutions available that work for merchants to prevent chargebacks from occurring. In the event a chargeback has been filed, this same solution can work to help merchants recover lost revenue and fix the problems that may have caused the chargeback.

It’s important to note that along with providing a clear definition of Visa chargebacks, the company also has specific documentation regarding how merchant refund, return, and cancellation policies should be communicated to customers.

An Overview of the Visa Chargeback Monitoring Program

The Visa Chargeback Monitoring Program is designed to make it easier for merchants to manage chargebacks as an aspect of their business. Remember, Visa (or any other credit card company) does not want to have a roster of merchants who receive large numbers of chargebacks.

To ensure that merchants are not experiencing high levels of unchecked chargebacks, Visa monitors merchant chargebacks on a monthly basis. If a merchant experiences a high level of Visa chargebacks for a given month, the company contacts the merchant’s acquirer and then expects the acquirer to work with the merchant to manage the chargeback situation.

Merchants should be aware of Visa’s recommendations for monitoring and preventing chargebacks:

• Track chargebacks based on reason codes
• Track chargebacks as part of the overall sales numbers
• Track card-present and card-not-present chargeback data separately

These best practices help merchants identify the flaws in their payment, authorization, and customer care processes. For example, a higher number of card-not-present chargebacks can indicate that there are problems with the online payment solution. The more information a merchant can collect about chargebacks, the easier it is to work with acquirers to prevent chargebacks.

Visa has three chargeback monitoring programs tailored to the unique situations of its merchants.

Visa Merchant Fraud Program

This monthly monitoring program reviews chargeback data for all U.S. merchants. In the event a merchant meets or exceeds pre-defined Visa chargeback restrictions, the merchant’s acquirer is notified with a written warning.

Visa expects the merchant and acquirer to make necessary adjustments after this first warning, to lower the chargeback threshold within a specified frame of time. If the merchant does not make adjustments that lower the chargeback threshold, Visa may respond with increased fees and additional monitoring.

For this reason, it is very important for merchants to know their chargeback ROI.

High Brand Risk Chargeback Monitoring Program

This Visa chargeback monitoring program is focused on high-risk merchants. Visa has a detailed list of high-risk merchants, including merchants involved in direct marketing, adult content, online pharmacies, gambling, travel services, and several others.

The High Brand Risk Chargeback Monitoring Program does not include the same warning notification or recovery period as the Visa Merchant Fraud Program. If a merchant meets or exceeds the limits defined in the high-risk program, the merchant’s acquirer is immediately assessed additional fees.

Global Merchant Chargeback Monitoring Program

This Visa program is applied when an international merchant meets or exceeds specified international chargeback thresholds. This program monitors merchants monthly and notifies the merchant’s acquirer with a written warning, should Visa chargeback levels be reached.

With this program, the merchant and acquirer do have time to work out any flaws that are contributing to the high number of chargebacks. If the merchant is not able to bring the chargeback numbers to within the recommended guidelines, fees and penalties are applied.

Managing Visa Chargebacks

All merchants should spend time thoroughly reading the documentation Visa has provided on its chargeback monitoring program, and any other supporting documentation. The more knowledge merchants have about the guidelines, recommendations, reason codes, and different monitoring programs, the better.

The key to a successful relationship with Visa, or any other credit card company, comes down to knowledge and due diligence. Having solutions in place that work to monitor customer habits, threat risks, and provide secure purchase authorization are part of a robust foundation for a successful business. Take advantage of the expertise available to you, and make sure that you’re doing all you can to prevent chargebacks so your business can continue to be secure and profitable.