TC40 data and SAFE data are terms commonly used by payment experts, but they aren’t widely understood concepts.
If used properly, TC40 and SAFE data can be a helpful fraud management tool. But if used incorrectly, merchants may suffer a lot of unnecessary revenue loss.
1. TC40 and SAFE data is used to monitor fraud.
Fraud is an ever-present concern for cardholders. The card brands (Mastercard, Visa, etc.) try to protect consumers and manage risk as best they can.
To do that, the brands need to know when fraud happens so they can monitor trends and identify risk factors. So the brands ask issuing banks to record each instance of fraud. When a cardholder claims a transaction wasn’t authorized, the bank collects details about the purchase and shares it with the card brand.
When fraud information is sent to Visa, it is added to the card brand’s TC40 report. Mastercard adds fraud information to the SAFE (System to Avoid Fraud Effectively) report.
2. Banks are required to report SAFE and TC40 data for all cases of fraud, but filing a chargeback is optional.
When an issuing bank submits SAFE or TC40 data, it is simply noting that fraud was reported. When the bank files a chargeback, it is initiating a process to reverse the transaction in question.
All fraud-related chargebacks should be be found on the SAFE or TC40 report. However, not all SAFE and TC40 data has corresponding chargebacks.
Why?
The process of filing a chargeback can be time consuming and expensive. If the expenses associated with filing a chargeback are more than the amount of the disputed transaction, it is usually more cost-effective to skip the process altogether. The bank will simply reimburse the cardholder directly rather than collect the funds from the merchant.
TC40 data collected from 88 merchants and analyzed by Midigator® helps explain this.
Percent of Cases That Were Less Than $8.00
The Bank Sent a Chargeback or Alert: 3%
The Bank Didn’t Send a Chargeback or Alert: 43%
Of all the transactions that had TC40 data, 11.3% of the fraud cases were resolved with a prevention alert and 63.7% advanced to a chargeback. However, 25% of transactions listed on the TC40 reports didn’t have an alert nor a chargeback.
Again, simply noting that fraud happened doesn’t automatically mean a chargeback will follow.
3. Merchants might be the only ones who don’t know there is a fraud problem.
SAFE and TC40 data ensures that nearly everyone involved is aware of instances of fraud — everyone except the merchant.
When a cardholder claims fraud, the issuing bank collects the fraud data and submits the notification to the card network. The card network consolidates the information from all issuing banks and then distributes the transactions by merchant to the corresponding acquiring banks.
Acquiring banks rarely automatically pass TC40 or SAFE data along to merchants. Merchants can request this information, but acquiring banks typically do not have an easy way to share it.
If merchants don’t have access to their fraud data and they aren’t receiving chargebacks for unauthorized purchases (see point #2 above), a fraud problem could grow significantly before it is detected.
4. Merchants risk enrollment in fraud monitoring programs.
Most merchants know what a chargeback-to-transaction ratio is, what the thresholds are for this metric, and what happens if disputes aren’t managed properly.
Merchants are usually less familiar with fraud monitoring programs, the fraud-to-sales metrics, and the role TC40 and SAFE data plays. This unfamiliarity can cause problems.
For example, Visa uses data from TC40 reports to calculate a merchant’s ratio of fraud to sales dollar amounts and the overall value of all fraudulent transactions. Merchants who exceed thresholds for both of these metrics may be enrolled in one of two (standard or excessive) Visa Fraud Monitoring Programs.
5. Learning from past mistakes can help improve future strategies.
Even though it is often difficult for merchants to get a copy of their TC40 and SAFE data, they should definitely try. The information these reports contain is valuable for a few reasons.
First, it is important for merchants to understand their fraud situation. Since all the other parties involved have access to the data and are using it to form opinions, merchants should be in the loop too.
Second, the more data poured into a pre-sale fraud tool, the more accurate the screening process will be. Isolating common characteristics of confirmed fraud cases can help detect future threats with greater accuracy.
There are other ways merchants might use TC40 and SAFE data, but those strategies are generally less effective.
6. Timing makes TC40 and SAFE data an ineffective chargeback prevention tool.
It may seem like TC40 and SAFE data can help merchants anticipate and prevent chargebacks. However, other than improving the effectiveness of pre-sale fraud screening, these data reports aren’t always helpful when it comes to chargeback prevention.
Ideally, a merchant would be notified when a transaction is reported as fraud. Then, the merchant could refund the transaction before the bank files a chargeback. However, TC40 and SAFE data isn’t always reported before the chargeback happens.
In fact, issuers can wait up to two months after the chargeback to submit SAFE data to Mastercard. By the time a merchant receives the fraud report and refunds the transaction, a chargeback has likely already been initiated — meaning the merchant would issue a double refund.
The effectiveness of using TC40 and SAFE data to prevent chargebacks depends on the goal. If merchants want a drastic reduction in chargebacks to prevent threshold breaches, then refunding transactions based on fraud data might be helpful. But if optimizing profitability is the goal, then refunding fraudulent transactions probably isn’t the best risk management strategy.
An alternative management strategy is to use prevention alerts. Like TC40 and SAFE data, prevention alerts notify merchants when transactions are disputed because of fraud. However, unlike TC40 and SAFE data, prevention alerts are sent in real time. This makes prevention alerts a much more effective chargeback management tool than TC40 and SAFE reports.
7. TC40 and SAFE data is becoming more useful.
Currently, TC40 and SAFE data isn’t very effective at preventing chargebacks for most merchants. However, the usefulness of the information will soon improve.
Ethoca and Mastercard are working together to update how Mastercard’s pre-chargeback data is delivered and used. The new workflow will enable merchants to refund disputed transactions with a guarantee that the case won’t advance to the chargeback stage.
Ethoca has already made changes to incorporate SAFE data into their chargeback prevention efforts. As the new pre-chargeback data is introduced, it will replace the SAFE data currently being sent.
Similarly, Visa is working with Verifi to enhance fraud data and dispute resolution tactics.
In order to be a part of this new-and-improved workflow, merchants must integrate directly with the card brand or through a preferred facilitator — such as Midigator. If you are interested in learning more, contact our team of experts.
Want to Know More about TC40 and SAFE Data?
Payment processing terms can be confusing. But at Midigator, we aim to remove complexities and simplify processes. If you’d like to know more about how TC40 and SAFE data can impact chargeback management, our team is happy to help.
