RDR vs. CDRN vs. Ethoca - Which is Right for You? 

I’m obsessive about protecting my online stores from disputes. Chargeback alerts are great for this. But there are 3 alert types.

This made me confused.

If you're confused too, read this guide. I'll explain the differences between these alerts. Then I'll tell you which to pick and when. I'll also talk about chargebacks.

Let’s begin with figuring out the differences.

Key Takeaways

• Most sellers should use RDR and Ethoca alerts.
• These alerts help tackle issues before a dispute happens.
• Use all 3 providers if your chargeback rate is over 1%.
• RDR only covers Visa transactions.
• CDRN only works for US transactions.

What Are the Differences With RDR, CDRN, & Ethoca?

RDR, a Visa product, covers only Visa transactions and automates refunds. CDRN, also Visa-branded, covers multiple card brands but requires manual refunds. Ethoca, a Mastercard product, covers various card brands and needs manual refunds too.

All these alerts aim to stop chargebacks.

The main difference are the card brands each enrollment covers as follows:

Ethoca can also cover some American Express and Discover deals if the seller signs up.

The exact coverage is not available.

1. Price per alert.

This will vary by provider. I’ll use Chargeback as an example.

You’d pay $35 per Ethoca and CDRN alert. With RDR, your price depends on your merchant category code.

If you have a riskier code, you'll pay more per alert.

For example, escort services (code MCC 7273) would pay $35 per RDR alert.

Record stores would pay $25.

RDR is more flexible with its pricing.

2. Then there’s the enrollment time.

Again, this changes by provider.

Using Chargeback as an example, it takes up to 10 work days to set up RDR.

But it takes up to 12 hours to set up Ethoca and CDRN.

This matters because a faster setup means you can stop more potential chargebacks.

3. Manual versus automatic refunds.

RDR is the only one that will auto-refund orders with alerts.

CDRN and Ethoca need you to manually refund the orders. Unless you use Chargeback, who handles refunds for you.

This difference is key for saving time. Less time on returns means more time for growing your business.

4. Supported regions.

Are you not based in the United States? Then you can’t use CDRN. It only covers transactions in the US.

RDR and Ethoca cover all global orders.

5. Wouldn’t we receive duplicate alerts with overlapping coverage?

Ethoca and CDRN will cover 15 – 20% of the same Visa orders.

This means you might get duplicate alerts for the same purchase if you use both. This could cost extra as you'd pay for 2 alerts on one order.

Some alert solutions will refund these charges (like us).

You’ll need to look into policies for other platforms before picking one.

RDR never causes double alerts with Ethoca or CDRN. They send alerts at different times in the dispute flow (acquirer versus issuer).

Visa sends one of the following messages to the acquirer on behalf of the issuer [1]:

• TC 15
• TC 17
• 0200

Then, they send a TC 33 message as “corresponding advice.”

The acquirer is the seller’s bank. The issuer is the shopper’s bank.

The “TC” and “0200” are message types used in Visa’s network for transactions. It shows a Dispute Financial message.

This means someone raised a dispute about a deal.

This video might help you understand this information from a new angle:

Let’s break down what these alert providers are.

Starting with RDR.

Summary: RDR, CDRN, and Ethoca differ in card brand coverage, refund automation, and price

What is Rapid Dispute Resolution?

Rapid Dispute Resolution (RDR) is a tool for sellers to quickly resolve disputes. It allows auto dispute fixing, helps avoid chargebacks, and makes customers happier through quick resolution.

RDR is a tool made by Visa to prevent chargebacks. It helps merchants to design rules for automatically resolving certain issues.

It refunds the buyer at the pre-dispute stage and avoids a chargeback.

Does RDR cost anything?

The cost for RDR alerts changes based on the platform you pick.

It also changes by merchant category code:

• Tier 1 codes, the safest types, cost the least.
• Tier 2 costs more and covers 90% of Stripe sellers.
• Tier 3 has the highest risk and price.

Here’s an example of what you’d pay with Chargeback:

Let’s see how this works.

Summary: RDR allows merchants to automatically refund customers for issues on orders that fall under a certain price point.

How Does Rapid Dispute Resolution Work?

Let’s say an issuer using RDR raises a dispute for an eligible order involving a merchant also using RDR.

The dispute follows this process:

1. A cardholder starts a dispute with a Visa RDR issuer.
2. The issuer submits the dispute to Visa's VROL.
   1. Visa's online dispute resolution platform.
3. If the order fits RDR rules, it pauses and starts the RDR process.
   1. This order must meet the transaction amount thresholds set by the merchant.
      1. For example, accept liability for orders of $20 or less.
4. The dispute reaches the payment processor with code "RDR" on the transaction.
5. It then automatically refunds the buyer.
6. The loop closes
   1. Dispute resolved, processor credits issuer, and chargeback averted.

* VROL is Visa Resolve Online.

Here’s a picture of how it works:

Source: Verifi

RDR-resolved disputes don’t affect the seller’s dispute rate. They also don't incur dispute fees.

When RDR fixes a dispute, the buyer gets credit using Visa's normal financial messages.

In simple terms:

There's no dispute because you accept the blame. Any deal fixed with RDR shows as an RDR-fixed order.

If the transaction isn’t RDR eligible, it’ll go through the dispute process.

We cover this in-depth in a separate piece.

Let’s tackle the next alert provider.

What is CDRN?

CDRN (Cardholder Dispute Resolution Network) is a Verifi service that resolves pre-dispute cases. It prevents chargebacks by sending real-time alerts and letting sellers talk to card issuers directly.

When a buyer raises an issue with their bank instead of the seller, CDRN steps in.

If the bank is part of CDRN, they send an alert through the network before charging back.

The merchant receives a CDRN alert indicating an ongoing dispute.

CDRN alerts offer a chance to talk to the buyer and maybe refund or fix the issue within 48 hours.

While refunds aren't ideal, they help avoid costly charges, fines, and fees linked to chargebacks.

It also protects your business from losing processing rights due to too many disputes.

Does CDRN cost anything?

CDRN alert costs will vary by platform.

Alerts with, for instance, Chargeback will cost $35 per instance.

CDRN doesn’t offer flexibility with pricing as RDR does with MCCs.

Let’s see how this platform works.

Summary: CDRN aims to resolve pre-dispute cases by sending alerts to merchants.

How Does CDRN Work?

Here’s how CDRN alerts will work:

1. Banks spot disputes and tell CDRN about possible chargebacks.
2. CDRN sends these alerts to the signed-up sellers.
3. Sellers review the disputes and decide what to do.
4. Merchants can refund the order or resolve the issue directly with the buyer.

CDRN doesn’t automatically refund orders like Rapid Dispute Resolution. But it has more coverage.

There’s not much else to talk about here.

Let’s check out the last provider type.

What are Ethoca Alerts?

Ethoca Alerts are notifications connecting merchants, acquirers, and issuers to share fraud and dispute data. They warn about possible chargebacks, allowing quick resolution and reducing disputes.

When a bank in the system starts a buyer dispute, Ethoca Alerts spots and flags the coming issue.

This lets the seller address the dispute and stop it from becoming a chargeback.

While most of these alerts come from Mastercard deals, a few (but not often) may come from Visa.

So long as the issuer is under Ethoca's service.

Does Ethoca cost anything?

Ethoca alerts will vary in cost by provider.

For instance, Chargeback will charge $35 per alert.

This price is the same for all supported card networks. For example, you’d also pay $35 for a Discover alert through Ethoca.

Let’s see how Ethoca works.

How Does Ethoca Work?

Here’s how Ethoca Alerts work:

1. Banks detect an odd order and send alerts to the Ethoca network.
2. Ethoca forwards these alerts to the signed-up merchants.
3. Sellers check the alerts and decide on what to do.
4. Merchants may:
   1. Stop the transaction
   2. Cancel orders; or
   3. Take other steps

There’s not much else to it. They’re almost the same as CDRN, except through Ethoca.

With all these choices, how do you choose a provider?

How do I Choose the Right Enrollment?

Here are some tips to help you choose the best alerts:

• Use all 3 if your chargeback rate is above 1%.
• Only US businesses can use CDRN.
• Make sure the platform will pay back for possible overlapping Ethoca and CDRN charges.
• If you need alerts right away, sign up for Ethoca and CDRN.
• Look for a solution that handles automatic Ethoca and CDRN refunds.

When picking the right approach for your business, think about these things:

1. How big your business is
2. How often you face disputes
3. Your business's specific needs and situation

The goal is to find a fix that not only helps handle these issues but also makes your business stronger long-term.

Weigh the pros and cons of each platform.

Here’s a quick video that’ll help you pick an alert provider:

Important:

If you go with RDR, or auto-refunds via Ethoca and CDRN, you can't control which dispute types you refund.

You may end up refunding customers and paying alert fees for chargeback types you could have won.

Folks who don’t have much margin with their products (e.g., e-commerce sellers) should consider chargeback management services instead.

These will help you build representment packages. They only charge if you win a dispute.

If you have a high rate of friendly fraud, alerts also aren’t the best choice.

Sellers win more than 43% of friendly fraud disputes. Why pay more than needed?

If you have a low chargeback rate (0.0 – 0.2%) alerts in general aren’t necessary.

If you’re in an industry like SaaS, they could prove beneficial. Since those in this industry typically have much higher margins.

They also have the highest average dispute-to-order ratio (0.66%).

And if you have a chargeback win rate of at least 50%, don’t go for alerts. Because when you win disputes, they won’t count toward your chargeback rate.

Folks in these circumstances will benefit the most from alerts in general:

• Low average sale prices (under $100).
• Those with low-risk MCC codes.
  • Best for saving money with RDR.
• Anyone with high dispute rates.

If you need alerts, you’ll want to know how to enroll in them.

How Do I Enroll in RDR, CDRN, & Ethoca?

For RDR and CDRN, you'll need to contact Verifi's customer support or Account Manager by phone, email, or contact form. Then, you must fill out an enrollment form.

This involves giving these unique IDs:

• Business Identification Number (BIN)
• Card Acceptor ID (CAID)

For CDRN enrollment, you must also sign an Addendum to Seller’s CDRN Agreement.

You can’t sign up for Ethoca Alerts through Verifi. You must do it through Ethoca.

To enroll in Ethoca Alerts, you must set up an API account. Then, you'll need to set up credentials and such.

If only there were a way to have all alert providers under a single platform…

Going with platforms like Chargeback makes this process much easier:

1. Choose a payment processor you want to use for refunds.
2. Pick an enrollment.
3. Add billing descriptors.
   • If you enroll under RDR, you’ll also need to provide ARN codes.
     • We explain how to do this with different payment gateways.
4. Wait.

Great. Now you have alerts.

You should also work on your general chargeback hygiene.

Let’s begin with the bare essentials.

What is a Chargeback?

A chargeback happens when a buyer disputes a charge with their bank instead of talking to the seller.

If the claim is valid, the bank takes the disputed money from the seller's account.

Many banks, processors, and card brands will refer to “disputes” and “chargebacks” as the same thing.

I’ll expand on these in a moment.

Let’s first talk about the causes of these.

Summary: A chargeback is a forced reversal of funds that the customer’s issuer does.

What is the Most Common Chargeback Type?

Friendly fraud is the most common type of chargeback. Between 2022 and 2023, it made up 75 – 86% of disputes [2].

This type of fraud involves the buyer submitting a chargeback for a purchase they allowed.

Sometimes customers are trying to defraud a merchant because they regret a purchase.

Other times, they're trying to get money back for something a family member bought.

True fraud is the least common type. Making up for 1% of transactions.

I’ve found conflicting statistics that suggest 30% of chargebacks come from stolen credit cards.

I suppose this all depends on the businesses surveyed.

Either way.

This type of fraud involves someone stealing the buyer's info and making a purchase without permission.

Merchant error leads to 20 – 40% of disputes [3].

This dispute type happens when sellers mess up, and customers get frustrated.

For instance, you could have charged someone twice for the same purchase.

Every chargeback type has consequences.

Let’s see what they are.

Summary: Friendly fraud is the most common dispute type.

Is a Chargeback Serious?

Chargebacks come with the following consequences:

• Chargeback fees: One-time fees that cost $10 – $100 per dispute.
• Dispute monitoring programs: A potential review fee and higher cost per dispute.
• Account suspension: Unable to use a card or payment system.
• Increased scrutiny: Card networks will pay more attention to your purchases.
• Direct chargebacks: Platforms like AMEX won’t give you the luxury of the inquiry process.

Chargebacks can cost double the product’s value. Many merchants in 2023 paid $191 in chargebacks on $90 orders.

Such costs can come from chargeback fees, the money lost from having staff handle disputes, and other costs. Like lost payment processing fees.

That doesn’t mean you should panic.

If your chargeback rate is higher, consider alerts.

Otherwise, focus on other cost-efficient chargeback prevention methods.

We discuss these in a separate piece.

There’s nothing else to discuss.

Let’s see some frequently asked questions.

Summary: Chargebacks come with additional fees, review fines, and potential termination of your account with a payment gateway.

FAQs

What is the Difference Between Verifi & Ethoca?

Verifi RDR alerts provide automatic refunds based on set rules. Verifi CDRN is similar to Ethoca alerts, which provides early warnings of potential disputes. Both alerts also require manual intervention.

Is Ethoca Owned by Mastercard?

Yes, Mastercard owns Ethoca. Mastercard acquired Ethoca in March 2019.

Is Verifi Owned by Visa?

Visa owns Verified by Visa. Visa developed and maintains this service to reduce chargebacks.

Conclusion

RDR, CDRN, and Ethoca each offer unique approaches to handling these issues. By understanding the strengths and limitations of each platform, you can choose the solution or combination of solutions that best fits your business needs.

Consider Chargeback if you’re looking for a good platform that offers these alerts. See how we’ve helped merchants reduce chargeback rates by up to 91%.

Sources

• [1] Rapid Dispute Resolution. Visa USA. 10/29/2020.
• [2] Chargeback statistics. Expert Market. 7/15/2024.
• [3] Chargeback benchmarks. Signifyd. 7/17/2024.