Chargebacks are now disputes

Visa Claims Resolution: Allocation and Collaboration Explained

Visa Claims Resolution (VCR) is changing the way the payments ecosystem manages chargebacks and disputes.

One of the key components of VCR is the differentiation between allocation disputes and collaboration disputes.

Why Two Different Dispute Types?

As part of the VCR initiative, Visa has vowed to use their own internal data more effectively and incorporate automation whenever possible. By doing this, Visa has created a new process for managing disputes.

However, not all dispute cases can be managed via automation. Therefore, in addition to the new process, a remnant of the old management style will linger.

What is VCR Allocation?

VCR allocation is the newly adopted management style that takes advantage of Visa’s internal data and automated technology.

Visa will consult internal data in an effort to assess liability to either the issuer or merchant. If liability for the dispute is assigned to the merchant, the merchant can only respond in certain circumstances and via the pre-arbitration model. Visa anticipates this automated process could cut dispute management timelines from 45 days to mere seconds and affect approximately 60-80% of cases.

It’s Visa’s intent that allocation reduces workloads and costs for issuers, acquirers, and merchants. However, our experts anticipate certain challenges will need to be overcome. to discuss the implications for your organization.

What is VCR Collaboration?

The VCR collaboration process is essentially the same workflow that the industry uses today to manage dispute. The issuer will submit a dispute to the acquirer. The acquirer will pass the dispute to the merchant. The merchant can challenge the validity of the dispute, if desired. Pre-arbitration and arbitration may follow.

While the collaboration process is similar to what the industry is familiar with, there are three major changes to note.

  • Vernacular - “Chargebacks” are now called “disputes” and “representment” is now known as “dispute response.”
  • Time Frames - Previously, the time frame for a dispute response (representment) was 45 days. Now, the time frame is just 30 days.
  • Reason Codes - VCR created four dispute categories (two allocation and two collaboration). Rather than 22 different reason codes, there will now be 24 dispute conditions divided into the four categories.

Allocation and Collaboration in Action

Allocation and collaboration workflows are both part of the overarching VCR framework. The path a case takes will depend on the way the dispute is categorized.

Allocation Collaboration
Management Style Liability-Assessment Model Litigation-Based Model
Action Taken Visa will consult internal data and assess liability to either the cardholder or the merchant. The merchant has a chance to respond to the dispute with compelling evidence; the issuer will determine the outcome (similar to current processes)
Dispute Categories Fraud, Authorization Customer Dispute, Processing Error

The two workflows are significantly different. An


VCR Allocation Flowchart


VCR Collaboration Flowchart

Are You Prepared?

All members of the payments ecosystem--issuers, acquirers, and merchants--have big changes ahead of them. On the surface, VCR may seem confusing and difficult to implement. However, there is no need for stress or hassle.

Midigator® team members can answer any questions you may have about the new Visa programs--including challenges associated with allocation and collaboration. And when you are ready to make necessary policy updates, Midigator can help. Gain access to VMPI, prevention alerts, and VCR-compliant dispute responses--all with a single integration.

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