Friendly fraud is a compounding issue that is all too familiar to merchants. It occurs when a consumer makes an online purchase with their payment card and then disputes the charge. Sadly, over the past few years, the number of such fraudulent instances leading to chargebacks has grown significantly along with the rise of eCommerce.
To address this problem, Visa, one of the biggest card networks, has updated its dispute program. The policy’s new version, Compelling Evidence 3.0 (CE3.0), is going into effect on April 15, 2023. Read this overview to find out what these changes are all about and how to prepare for them.
Thus, in response to such alarming figures, Visa decided to update its dispute program developed in partnership with its clients, the Merchant Risk Council (MRC), and the Merchant Advisory Group (MAG). The aim of CE3.0 is to reduce fraud in the payment ecosystem, minimize losses, and help merchants fight against first-party misuse.
Visa states that Compelling Evidence is proof of the cardholder participating in a transaction, receiving the goods or services, or benefitting from the purchase.
Compelling Evidence 3.0 is Visa’s take on creating a new standard regarding what is accepted as valid proof of the merchants’ honest actions and can be used in resolving chargebacks in their favor.
When Visa’s new CE3.0 standard takes effect in April 2023, merchants will need to provide the following proofs as compelling evidence:
Merchants will be able to provide evidence against fraud claims in two instances:
In the first case, Visa will pick up to five transactions that are older than 120 days old and were never disputed. If the merchant can provide the data elements required by CE3.0 for two of those purchases, Verifi will review the dispute and prevent it from becoming a chargeback.
The liability for resolving the case will then shift to the card issuer, and neither the merchant’s chargeback rate nor their fraud rate will be affected.
When the dispute has already become a chargeback, the merchant can still fight it through the chargeback representment process. To do it, they will need to work with an acquirer to select the transactions with the qualifying data elements, fill out the necessary forms, and submit the data to Visa Resolve Online.
If the process is successful, the business’s fraud rate will not be affected, yet the chargeback will still count against them.
There are several things merchants could do to prepare for Visa’s new anti-chargeback standard, namely:
Collect CE3.0 Remedy Criteria for All Transactions
Visa suggests all merchants start aggregating the data elements, such as IP addresses, device IDs or fingerprints, shipping addresses, and account login IDs, already now. This way, they will have plenty of evidence to use in the event of disputes when the new standard goes live. Businesses will then be able to share the collected data via Order Insight and prevent chargebacks effectively.
Implement a Digital Fraud Prevention Solution
One of the best ways to prevent friendly fraud is to stop bad actors before authorizing a dishonest transaction. However, doing it manually would be impossible, especially when it comes to bigger companies.
Payneteasy’s 150+ customizable anti-fraud filters, customer behavior analysis function, and chargeback prevention solution with an Ethoca integration accurately identify fraudulent activity and help you mitigate the risks associated with it.
Get a Dispute Management Tool
Effective friendly fraud prevention requires yet another essential element - a dispute and chargeback management solution. Such a tool enables merchants to provide customers and issuers with more compelling evidence and handle the process in the most efficient way possible.
All in all, to be well-prepared for Visa’s CE3.0 standard, merchants need to make sure they are collecting the necessary data elements in advance. Merchants should also store these details in a way that they are easily accessible in case there is a need to respond to an Order Insight inquiry or submit them to Visa Resolve Online.
Finally, it’s essential for businesses to have the right tool kit to prevent and manage disputes. That’s where Payneteasy comes in - reach out to us, and we will gladly provide you with more information on how we can help your business avoid chargebacks and different types of fraudulent activity!
1 - Visa - What every merchant needs to know about friendly fraud