Key takeaways

Visa Chargeback Guide for Merchants For 2024

This guide will cover everything sellers need to know about dealing with chargebacks from Visa. Read on to learn more.

Author

Theodore Covey

Key Takeaways

Visa chargebacks share similarities with other networks but with some differences.
Visa Resolve Online (VROL) centralizes dispute resolution for acquirers and issuers.
Businesses have specific time limits to respond to dispute notifications from Visa.
Visa Dispute Monitoring Program monitors and penalizes merchants for excessive chargebacks.
Sellers can utilize Visa's tools to prevent and fight chargebacks effectively.

Are Visa Chargebacks Different From Others?

Visa chargebacks share similarities with chargebacks from other card networks like Mastercard or American Express, but they also have some key distinctions:

Similarities:

Purpose: Cardholders still dispute transactions and potentially receive a reversal if there are issues with the purchase.
Process: The general chargeback process is similar across card networks.
The Use of Reason Codes: All card networks use reason codes to categorize the reason for the chargeback, such as fraud, unauthorized transactions, or merchandise not received.some text
- The specific reason codes will differ by network, though.

Differences:

Chargeback Threshold: The number of chargebacks you can have before facing consequences.some text
1. We’ll cover this in-depth, later. It’s nuanced.

Visa Resolve Online (VROL): Dedicated platform where everyone shares information regarding the dispute.
Tools Available: Offers additional dispute management and fraud protection tools like Visa Merchant Purchase Inquiry and Rapid Dispute Resolution.
Excessive Chargeback Penalties: Visa has harsher consequences for merchants who exceed their chargeback threshold with their Visa Dispute Monitoring Program.
Doesn’t Use Retrieval Requests: Visa phased out the use of retrieval requests in 2020. some text
- Card networks like Discover use these to give sellers a chance to submit evidence prior to a chargeback [1].

Visa Resolve Online Makes Things Easier

Available in: North America, Asia-Pacific, Europe, LAC, and CEMEA.

Visa Resolve Online (VROL) is a web-based platform designed by Visa to centralize dispute resolution between merchants and issuing banks.

VROL allows issuers and acquirers to:

Retrieve transaction and financial information.
Electronically transfer documents and information for disputes.
Submit pre-filings and report fraud.
Manage exception file listings and respond to retrieval requests.
File, appeal, or withdraw compliance cases and arbitrate chargebacks.

The platform also incorporates the Visa Merchant Purchase Inquiry (VMPI) process. Enabling banks to request additional information from vendors about disputed transactions, potentially preventing chargebacks through clarification or refunds.

Visa’s dispute platform features 2 dispute workflows:

Allocation
Collaboration

For brevity sake, I’ll cover these paths more in-depth when discussing the dispute process.

To use VROL, retailers must contact their acquirer for setup, ensure their systems meet technical requirements, enroll by filling out a form, integrate and test the platform, and utilize training resources.

Sellers can manage disputes in VROL by monitoring new disputes, submitting compelling evidence, collaborating with involved parties, and tracking the progress of each case.

This is condensed from a massive guide we wrote on VROL. Check it out to learn more about the platform, its requirements, and the information you’ll provide.

Time Limits for Merchants, Cardholders, & Issuers

Here are the Visa dispute time limits for merchants, cardholders, and issuers in 2024:

File a Dispute as a customer: 120 days
Respond to a dispute as a merchant: 20 days
Dispute a transaction a second time as a customer: 30 days

Notes:

The actual time the customer has to file a dispute will depend on the reason code and issuing bank.some text
- Customers have 75 days to file a chargeback with the following reason codes:some text
  - 11.1
  - 11.2
  - 11.3
  - 12.7

You might have heard of the 540-day rule.

It’s an exception to the standard 120-day timeframe for filing chargebacks. It applies to situations where the shopper didn’t receive a product or service. Allowing cardholders up to 540 days from the transaction date to initiate a dispute.

For example, if a consumer paid for a service in January 2023 but never received it, they could file a chargeback until July 2024 under this rule.

Then there’s reason code 13.6, "Credit Not Processed."

Issuers must wait 15 days from the transaction date before they can dispute it unless that would cause the dispute to exceed 120 days.

The Chargeback Process Itself: Is it Different?

In short:

The players in the process remain the same: Cardholder, merchant, inquirer, and acquirer.
Visa Claims Resolution (VCR) aims to eliminate invalid disputes with its “new” process in 2018.
85% of disputes end up in the Allocation workflow.
15% end up in Collaboration.
VCR led to a 7 – 10% reduction in dispute volume with some merchants [2].

Here’s what Visa’s dispute process (aka chargeback process) looks like after the Visa Claims Resolution Initiative:

Screenshot from Visa.

1. Pre-Dispute

Before a dispute is filed, issuers can use VMPI to verify transaction details with the merchant. Visa Merchant Purchase Inquiry can help fix issues before they escalate to chargebacks.
Issuers must complete a detailed questionnaire to ensure all necessary information is collected before filing a dispute.

2. Dispute Submission

Disputes are categorized into 4 categories: Fraud, Authorization, Processing Errors, and Consumer Disputes. This determines which workflow the dispute will follow.some text
- Allocation: Fraud disputes follow this workflow, where Visa uses internal data to assess liability and may automatically block invalid disputes.
- Collaboration: Processing Errors and Consumer Disputes follow this workflow, where issuers and acquirers collaborate to resolve the issue.

If unresolved, it can escalate to pre-arbitration.

3. Dispute Response/Pre-Arbitration

Merchants have 30 days to respond to a dispute notification.
Sellers must provide compelling evidence to challenge a dispute, especially in the Allocation workflow where Visa has already made a liability determination.
If the dispute remains unresolved, it can escalate to pre-arbitration, where Visa acts as an arbitrator to make a final decision.

Visuals always make things easier to understand. Hopefully this screenshot will help you:

Visa’s Chargeback Threshold: What’s Excessive?

Early Warning: >0.65% of transactions or 75 chargebacks.
Standard: >0.90% of transactions or 100 chargebacks.
Excessive: >1.80% of transactions or 1,000 chargebacks.

Visa calculates the dispute to sales ratio by sales in the same calendar month. Not the previous, like what Discover does.

The 3 tiers that I listed are the different levels of the Visa Dispute Monitoring Program (VDMP). This is something you need to worry about as a merchant and I’ll explain why.

Why You NEED to Know About the Visa Dispute Monitoring Program

The Visa Dispute Monitoring Program (VDMP) is a compliance program that manages merchant chargeback levels. If you’re familiar with Mastercard, think of their Excessive Chargeback program (ECP).

It monitors merchants' chargeback-to-transaction ratio, placing them into different tiers based on their performance:

Early Warning: Notifies merchants nearing Visa's chargeback thresholds, encouraging proactive measures to avoid penalties.
Standard: Sellers exceeding thresholds face monitoring and potential non-compliance fees, depending on enrollment duration.
Excessive: High chargeback ratios incur immediate non-compliance fees, stricter monitoring, and potential mandatory audits.

Here’s a visual that showcases the consequences of being in this program:

Screenshot from JP Morgan (PDF link).

The number of months represents the months the merchant remains in the Standard or Excessive tiers. As you can see, the longer you don’t improve your chargeback (dispute) rates, the worse the consequences.

The difference between Standard and Excessive is the time it takes for you to start paying up. Standard is more generous, giving you a few months to improve your rates. But Excessive immediately throws you under the bus.

Chargeback fees for Visa are usually $10 - $20, but those increase to $50 per dispute once you reach months 5 - 12 (Standard) and the whole duration of being in Excessive. Once you reach month 10 for Standard or month 7 for Excessive, Visa will charge a one-time $25,000 review fee.

And those added fees aren’t the worst of it.

If you don’t improve your chargeback ratio after 12 months in either program, Visa will suspend your ability to process transactions with their card.

Chargebacks are serious.

Visa Fraud Monitoring Program is Important, Also

The Visa Fraud Monitoring Program (VFMP) is a compliance program implemented by Visa to identify and address merchants with excessive fraud rates. Chargebacks that count as “fraud” will fall under Visa’s reason codes for fraudulent transactions.

Similar to the VDMP, VFMP operates on a tiered system with escalating penalties:

Notes:

Fraud volume: The ratio of the USD volume of EFWs to the USD volume of all captured payments.
The fraud rate: This shows what percentage of a merchant's sales might be fraudulent.
Visa Secure: In the U.S., merchants utilizing Visa Secure (3-D Secure) are monitored under VFMP-3DS, a program specifically tracking fraud rates for transactions using this security technology.

Here’s what each of these tiers are:

Early Fraud Warning (EFW): When a merchant's fraud rate approaches Visa's threshold, an EFW is issued, urging the merchant to investigate and implement fraud prevention measures.
VFMP Standard: Merchants consistently exceeding fraud thresholds are enrolled in the Standard tier. They face increased monitoring, potential non-compliance fees, and may be held liable for fraud-related chargebacks.
VFMP Excessive: Sellers face immediate non-compliance fees, stricter monitoring, and potential termination of their ability to process Visa transactions.

And Visa Secure is only applicable to the US.

Let’s see the fees…

Businesses in the Standard tier for the first 4 months won’t face any fines, but they will in the Excessive tier. Each of these fines will surface when you need to pay them when reaching a particular month.

For instance, you reach month 5 in the Standard tier and you’ll pay $25,000. If you’re in the program for 7 months in the same tier, you must pay an additional $50,000.

Failure to improve your fraud rates will result in losing the ability to process Visa transactions.

And the Visa Digital Goods Merchant Fraud Monitoring Program

Early Warning: $15,000 fraud volume and 150 counts of fraud and 0.45% fraud rate
DGMFM Standard: $25,000 fraud volume and 300 counts of fraud and 0.90% fraud ratio

The Visa Digital Goods Merchant Fraud Monitoring Program (DGMFM) is an extension of the Visa Fraud Monitoring Program (VFMP) tailored for merchants selling digital goods.

It operates similarly to the VFMP, but with lower thresholds for triggering non-compliance due to the higher risk associated with digital goods.

This program applies to the following Merchant Category Codes (MCCs):

5818: Large Digital Goods Merchant
5735: Record Stores
5816: Games
5817: Applications (Not Games)
5818: Large Digital Goods Merchant

This monitoring program has similar consequences to the others, except with different fees:

Screenshot from Stripe.

Reason Codes You’ll Likely Encounter

1. Cardholder Disputes

2. Fraud

3. Processing Errors

4. Authorization

How to Prevent Visa Chargebacks & Tools to Help

The ways to prevent chargebacks with Visa are similar to any other platform — have clear policies, manage your inventory and shipping expectations, accurate product descriptions, etc.

However, Visa offers a few tools to help you tackle and prevent disputes:

Rapid Dispute Resolution: Automatically refunds transactions.
Order Insight: Provides clarity on transaction information to customers.
Compelling Evidence 3.0: Reduces instances of friendly fraud by using customer data as evidence.

Let’s dive in.

1. Rapid Dispute Resolution

Visa Rapid Dispute Resolution (RDR) is a service that aims to resolve transaction disputes before they escalate into chargebacks.

Here’s how it works:

When a cardholder initiates a dispute, the issuer can submit a pre-dispute inquiry through VROL.
Evaluates the dispute based on predefined rules and parameters set by the merchant.some text
- This can include transaction amount, reason for dispute, and previous customer history.
If RDR determines the dispute is valid, it can automatically refund the customer, resolving the issue without a chargeback.
If it cannot automatically resolve the dispute, it may escalate the situation for manual review by the seller.

However, RDR only works for Visa cards. If you want similar services, such as Mastercard, you’ll need Ethoca and CDRN. Bundling all of these alert providers can become cumbersome and costly.

We reduce the headache of getting started with these alert providers while saving you money on alerts. Learn how.

Anyway.

2. Order Insight

Visa Order Insight is a service that provides cardholders with detailed transaction information, including:

Merchant details
Purchase date
Amount
Description of the goods or services purchased

This enhanced transparency reduces inquiries and disputes by giving shopper the information they need to recognize transactions and understand their purchases.

For retailers, Order Insight can help reduce customer service inquiries and potential chargebacks by providing a clear and detailed transaction record.

3. Compelling Evidence 3.0

Visa Compelling Evidence 3.0 is a guideline that helps merchants fight friendly fraud chargebacks.

By allowing them to submit evidence of the buyer’s purchase history, such as previous legitimate transactions with the merchant, it helps demonstrate the cardholder's familiarity with the business and reduces the likelihood of disputes based on claims of unrecognized transactions.

I’ll cover this software in more detail under “What Makes a Visa Chargeback Invalid.”

What is a Visa Chargeback (Why Should Merchants Care)?

Visa Dispute Process Duration: goal is less than 31 dayssome text
- Typically 46 days
- Complex issues take more than 100 days

A Visa chargeback is a reversal of funds initiated by the cardholder when they dispute a transaction with a merchant.

It functions the same as a chargeback from other card networks like Mastercard or American Express, allowing the customer to request a refund for various reasons.

While the general process remains similar, Visa uses specific reason codes to categorize disputes and may have slight variations in its chargeback process.

Regardless of the card network, sellers have the right to dispute chargebacks by providing compelling evidence to prove the transaction's validity. And don’t worry too much, you have a 30% chance of winning a chargeback [3].

Is Visa Fair With Disputes?

Since the introduction of Visa Compelling Evidence 3.0 (CE3.0) in 2023, vendors have had more of a winning chance during chargebacks.

It’s a set of guidelines that allow sellers to use a shopper’s transaction history as proof of legitimacy in disputes, specifically targeting friendly fraud (reason code 10.4).

This makes the chargeback process fairer for merchants by providing a standardized framework to present evidence of prior legitimate purchases.

That’s because prior to these guidelines, the rules regarding “compelling evidence” were vague and were heavily against the seller regarding friendly fraud disputes. And these made up for 50% of disputes [4].

What Makes a Visa Chargeback Invalid?

A Visa chargeback is considered invalid when it doesn't adhere to Visa's rules and regulations or when the reason for the dispute is not legitimate.

Here are some scenarios that can lead to invalid chargebacks:

Time limit exceeded: If the cardholder files a chargeback after the allowed timeframe.
Incorrect information: If the consumer provides inaccurate or misleading information in their dispute claim.
No valid reason: If the customer's reason for the dispute does not fall under Visa's recognized reason codes.
Friendly fraud: When a shopper knowingly makes a purchase but later disputes it to get a refund.
Failure to attempt resolution: If the buyer didn’t attempt to fix the issue with the seller before filing a chargeback.
Associated Transactions: If a merchant has already processed a refund, credit, or reversal for the disputed transaction before the chargeback is initiated

Visa will automatically block many of these disputes on their VROL platform. I couldn’t find any numbers on how many invalid disputes Visa blocks, though.

Here’s How to Win a Visa Dispute

Winning disputes as a business, like any chargeback, hinges on providing compelling evidence that demonstrates the transaction's legitimacy.

This involves submitting:

Detailed proof of service or delivery
Customer communication records
Signed contracts
Documentation that validates the purchase
Other evidence depending on the reason code

By documenting each transaction and responding to disputes with comprehensive evidence, you can challenge illegitimate claims and increase your chances of winning Visa chargebacks.

Wrapping Up

Visa chargebacks are almost identical to those on other platforms, except with slight variations with timelines, different reason codes, and additional tools. You’ll need all the tools you can get to mitigate chargebacks.

That’s where we can help. We combine alert providers (RDR, Ethoca, and CDRN) to make preventing disputes easier and cheaper. Learn how now.

Sources

1: Visa: Sunset of Retrieval Requests
2: JP Morgan: VDMP and VFMP
3: Midigator: Chargeback statistics
4: Checkout: Visa Compelling Evidence 3.0