Is using TC40 data for chargeback prevention problematic?

TC40 is raw data from the issuer that contains past instances of fraud reported by issuers. Because TC40 includes more than just chargeback data it is a key tool in helping merchants access their fraud prevention and risk management approaches. Most importantly, this data can help merchants create more effective fraud prevention strategies.

It is logical for merchants to use TC40 data to evaluate their overall fraud prevention strategy since issuers generally use these reports to measure the risk of fraud at each merchant. Using TC40 files as a measure of fraud risk, merchants can adjust their fraud prevention tools to keep fraud within a reasonable threshold. This not only protects their bottom line, it also allows them to avoid fines from issuers and the potential of total loss of card processing privileges.

Because the file contains more data than just chargebacks occurrences, it is often ineffective to help merchants prevent chargebacks.  TC40s only include claims by cardholders of fraud, not necessarily a dispute or chargeback. Open-loop services that offer chargeback alerts based on TC40 data contribute substantially to double refunding, false positives and chargebacks that could have been prevented.

TC40s are typically released within days of the initial report of fraud, but these are merely reports of fraud and do not stop the chargeback process. That means that merchants often do not have ample time to resolve disputes before they become chargebacks, defects occur often resulting in double refunding, chargeback fees are incurred, loss of goods and increased operational costs are experienced.