What is Visa Claims Resolution (VCR)?

  • Jessica Velasco
  • April 8, 2020
  • 7 minutes

Visa Claims Resolution is a detailed framework for managing chargebacks and disputes. 

We’ve highlighted the primary features so you can fully understand how this initiative impacts your business. Read below for a comprehensive overview or click to a specific topic:

What is Visa Claims Resolution?

Visa Claims Resolution (VCR) was one of the most drastic updates the payment industry experienced in decades.

WHAT: Visa Claims Resolution is an initiative to streamline workflows and standardize rules for chargeback and dispute management.

WHO: The initiative impacts all payment industry stakeholders—issuers, acquirers, processors, and merchants.

WHEN: VCR went live in April 2018.

WHY: Visa recognized that legacy processes for managing chargebacks and disputes were outdated. VCR ushered in a more modern era for dispute resolution with a simplified, streamlined, cost-effective workflow that relies heavily on automated technology.

The initiative is broken down into two different workflows and several different steps.

visa-claims-resolution-vcr-guide

VCR Terminology: New Phrases & Definitions

About the time that “chargebacks” gained widespread understanding, Visa went and changed everything!

Here’s what you need to know about new terminology brought about by the Visa Claims Resolution initiative.

Dispute

Visa phased out the word chargeback and replaced it with dispute.

Dispute Response

Visa phased out the word representment and replaced it with dispute response.

Transaction Inquiry

When a cardholder initiates a dispute, the issuer submits a transaction inquiry to Visa Resolve Online (VROL) to determine which transaction or transactions are being challenged.

Associated Transactions

Visa responds to a transaction inquiry with a list of associated transactions (previous credits, reversals, adjustments, etc.) that could proactively make the dispute invalid.

Dispute Condition

Visa phased out 22 reason codes and replaced them with 24 dispute conditions.

Dispute Category

The newly-established dispute conditions are divided into four dispute categories: fraud, authorization, processing error, and consumer disputes.

Allocation

VCR introduced a new dispute resolution workflow called allocation. Allocation enables Visa to use internal data and automation to determine who is responsible for a dispute (learn more about allocation in the next section).

Collaboration

The legacy dispute resolution workflow is referred to as collaboration. It is a litigation-based process (learn more about collaboration in the next section).

Pre-Arbitration

Because liability has already been assessed with allocation disputes, there technically isn’t a dispute response opportunity. Instead, merchants respond with pre-arbitration. Even though merchants still share compelling evidence just like they would with a dispute response, the process is considered pre-arbitration for cases classified as fraud and authorization issues.

New Dispute Resolution Process: Allocation vs. Collaboration

VCR features two distinct dispute resolution styles: allocation and collaboration.

Allocation uses Visa’s internal data to automatically assign liability. Collaboration is essentially an updated version of Visa’s legacy workflow.

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

Visa consults internal data in an effort to assign liability to either the issuer or merchant. 

If liability is assigned to the issuer, the case is closed and the bank or cardholder is responsible for paying the transaction. If liability for the dispute is assigned to the merchant, the merchant can either accept responsibility or respond. 

However, because liability has already been assessed for allocation disputes, there technically isn’t a dispute response opportunity for merchants. Instead, the response is considered pre-arbitration. 

Visa’s intent was for allocation to reduce workloads and costs for issuers, acquirers, and merchants. However, certain challenges remain. If your business is struggling to understand or manage allocation disputes, contact Midigator. We’re happy to discuss the implications for your organization.

The VCR collaboration process is essentially the same workflow that Visa used for decades (and which other card brands still use today). 

The issuer submits a dispute to the acquirer. The acquirer passes the dispute to the merchant. The merchant can challenge the validity of the dispute, if desired. Pre-arbitration and arbitration may follow.

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

ALLOCATION
  • Managed with liability-assessment model
  • Visa consults internal data and assigns liability to either the cardholder or the merchant.
  • Fraud & Authorization dispute categories
visa-claims-resolution-vcr-guide
COLLABORATION
  • Managed with litigation-based model
  • The merchant has a chance to respond to the dispute with compelling evidence; the issuer will determine the outcome.
  • Customer Dispute & Processing Error dispute categories
visa-claims-resolution-vcr-guide

Visa Dispute Conditions

VCR created four dispute categories: fraud, authorization, processing error, and consumer dispute.

The categories fraud and authorization are managed with the allocation workflow. The categories processing error and consumer dispute are managed with the collaboration workflow. 

Within those four categories, there are additional subcategories which are intended to provide greater clarity around the reason for the dispute. The 24 subcategories are called dispute conditions. A complete list of Visa dispute conditions can be found here.

VCR Time Frames

One of the primary goals of the Visa Claims Resolution initiative was to reduce resolution time frames. VCR time limits are as follows:

STAGEALLOCATION TIME FRAMECOLLABORATION TIME FRAME

Dispute Response

Not applicable

Within 30 days of the dispute processing date

Pre-Arbitration

Within 30 days of the dispute processing date 

Within 30 days of the dispute response processing date

Pre-Arbitration Response

Within 30 days of the pre-arbitration processing date

Within 30 days of the pre-arbitration processing date

Arbitration

Within 10 days of the pre-arbitration response processing date 

Within 10 days of the pre-arbitration response processing date 

Common Challenges & How to Overcome Them

VCR likely impacts your business in several different ways. Here are the most common challenges and how to respond. 

Allocation dispute outcomes are determined by CVV2, AVS and 3D Secure responses. If you don’t use these tools, you may be found liable and lose the ability to challenge the dispute.

  SOLUTION: Use fraud prevention tools.

Check with your processor about adding CVV2, AVS, and 3D Secure to your pre-authorization fraud screening.

Not only can these tools help stop fraudulent transactions from being processed, they can also serve as a key piece of compelling evidence if you choose to fight allocation disputes.

Like your chargeback-to-transaction ratio, card networks also monitor your fraud-to-sales ratio. With VCR regulations, the risk of breaching fraud-to-sales thresholds increases.

Visa retired the “unrecognized” reason code (number 75)—a reason code that wasn’t previously considered fraud. Now, those unrecognized disputes are often funneled into the fraud dispute category—an action that does impact the fraud-to-sales ratio.

  SOLUTION: Be Proactive.

If your fraud-to-sales ratio increases and you could possibly breach thresholds, take action.

  • Use dispute resolution tools. Issuer-to-merchant collaboration networks (like Order Insight and Eliminator) can resolve cardholder issues before they progress to disputes.
  • Update your billing descriptor. Use words and phrases cardholders will recognize. Consider adding your phone number or website to your billing descriptor so the customer can contact you—and not the issuer—if there are problems.
  • Improve the customer experience. Make sure your customer service department is answering emails promptly and phone call wait-times are short.
  • Issue refunds promptly. And properly document action taken in your CRM.
  • Upgrade pre-transaction fraud screening. If genuine fraud is a concern for your business, take steps to reduce your exposure now (these tools can help). You won’t be able to sustain high levels of legitimate fraud and friendly fraud.

The VCR initiative was designed to weed out invalid cases—like disputes initiated after a refund has been issued. However, the process is subject to error.

It is possible to refund a transaction and still get a dispute

  SOLUTION: Take quick and accurate action.

When a cardholder initiates a dispute, the first thing the issuer does is consult Visa Resolve Online (VROL) to conduct a transaction inquiry. The transaction inquiry will return pertinent transaction data that will help the issuer determine how to proceed.

For example, if the transaction inquiry reveals a credit has already been issued, the dispute will be closed.

Therefore, it is imperative that you issue refunds promptly so the action will be noted in VROL when the issuer checks.

It has always been challenging for merchants to create and submit dispute responses on time. A lot of revenue is forfeited simply because cases expire without action.

Unfortunately, the task is even more arduous with VCR. Within the 30-day VCR time frame that’s allotted for a dispute response, merchants usually only have between 3 and 18 days to act. 

Moreover, with VCR, you aren’t allowed to simply let disputes expire. You must respond to at least accept liability. If you don’t, you’ll have to pay additional fees.

  SOLUTION: Organize and automate.

Review your transaction data. Make sure you are collecting all necessary compelling evidence and you can easily access it. 

You should also consider switching from a manual response process to an automated response process. Automation can respond to disputes well within the allotted time frame, meaning you never have to worry about cases expiring or needlessly sacrificing revenue. 

Technology can also easily compile compelling evidence that is specific to reason code. This gives you the best possible chance of winning more disputes, thus increasing your overall ROI.

Visa plans to further shorten the dispute response time frame to 20 days, meaning you would probably have 12 days or less to respond. At that point, your processes will have to be automated and scalable. You may as well make the transition now!

If you needed any more encouragement, Visa provides financial compensation to merchants who respond quickly. The faster you respond, the less you pay in fees. The longer it takes, the more you’ll be charged.

Midigator automation is compliant with VCR. If you’d like to see how the technology can streamline and simplify VCR requirements, sign up for a demo here.

Visa created VCR as a technological solution to a modern challenge. This is just one of many ways the payment industry is morphing into an efficient, tech-driven, data-oriented era.

Unfortunately, manual processes no longer have a place in this advanced environment. If you want to experience all the benefits Visa has intended, you must likewise embrace technology.

If you remain dependent on manual processes, VCR could actually increase costs rather than decrease them. You’ll need more skilled laborers to duplicate what technology can do seamlessly.

  SOLUTION: Trust technology.

Fortunately, the transition from manual labor to advanced technology isn’t difficult. In fact, it infinitely simplifies things!

A single integration with Midigator means you are fully compliant with all Visa program updates—plus, you get so much more!

  • Unprecedented transparency and efficiency
  • Intelligent, data-driven decisions
  • Reduced labor costs
  • Unrivaled ROI

Full compliance with VCR can significantly improve your business’s bottom line. Contact Midigator today to learn more.

Ready for a Change?

What is VCR? VCR is a chance to shed outdated, labor-intensive processes and embrace a standardized environment, rich with potential benefits.

On the surface, it may seem difficult to experience those benefits. However, there is no reason for VCR to cause stress or hassle. 

Midigator aims to remove the complexity of payment disputes. Our team members can answer any questions you may have about VCR. And when you are ready to update your chargeback management strategy, Midigator can help.

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