TC40: What They Are & How They Help You

As someone who used to sell stuff online, I wish I had more resources about chargebacks back then. This guide will give you this information.

Today, we’ll discuss TC40 data and FLD reports. I’ll explain what it is, how it's used, and how it could help reduce chargebacks.

Let’s dive in.

Key Takeaways

• Visa adds TC40 data to RIS reports, and Mastercard uses FLD.
• Both card networks use these reports to determine whether a merchant has too much fraud.
• Merchants can request this data from acquiring banks, but it’s not guaranteed they’ll give it to you.
• Not all fraudulent orders that result in TC40 reports result in chargebacks.
• TC40 reports don’t account for friendly fraud.
• Mastercard replaced SAFE with Fraud and Loss Database.

What is TC40 Data?

TC40 data is a report issued by banks to card networks to identify fraud. It includes transaction details like date, issuer, and currency. Merchants use TC40 data to spot fraud patterns and boost fraud prevention.

Visa will collect TC40 data as part of its Risk Identification Service (RIS). And Mastercard will collect it for their Fraud and Loss Database, previously known as SAFE.

Both databases are tools designed to help issuers assess the risk of fraudulent transactions in real time.

Each operates behind the scenes.

Evaluating each transaction based on various data points provided by Visa, the merchant, and the issuer.

I’ll discuss the details of what they’re used for in a bit.

But wait.

How about American Express, Discover, and other card networks? What risk identifications do they use?

There’s no public data available. Sorry.

I’ve seen a lot of people ask what SAFE is. Let’s talk about that.

Summary: TC40 data is a report of fraud.

What is Mastercard’s SAFE?

Mastercard's SAFE (System to Avoid Fraud Effectively) logs cardholder fraud claims and details. It tracks fraud activity, cardholder info, and merchant data. SAFE helps identify fraud patterns and develop prevention strategies.

As of October 2020, Mastercard replaced SAFE with Fraud and Loss Database (FLD).

SAFE is still the same program as FLD.

However:

Since many people look up the word “SAFE,” I’ll use both terms interchangeably.

Now we know what TC40 data and FLD/RIS are. How do they work?

Summary: SAFE/FLD is Mastercard’s version of RIS.

How Do TC40 Data Work?

TC40 reports are generated when cardholders report fraud. Issuing banks collect and send this data to card networks. This data helps identify fraud trends and assess merchant risk, but merchants don't see specific fraud details.

Here’s a visual on how FLD fraud submission will work for Mastercard:

Source: Mastercard

These reports will typically contain the following information:

1. Merchant information: Name, location, Merchant Category Code (MCC), and other details.
2. Cardholder information: Card type, issuing bank, etc.
3. Transaction details: Date, time, amount, location, and other data points.
4. Dispute reason code: A code that spells out the type of fraud claim.
5. Bank information: Issuing and acquiring bank, and potentially processor information.
6. Internal communication: Between banks and card companies.

For context:

• Acquirer: Your payment processor or bank that represents you during disputes.
• Issuer: The customer's banks.

Issuers can submit FLD data to Mastercard up to 2 months after a chargeback. This delay makes chargeback prevention unreliable.

With that said:

Banks must submit TC40 data for all fraud instances.

A chargeback may or may not follow, depending on the situation.

For low-value fraud cases, the issuer might reimburse the customer. This is often cheaper than processing a chargeback.

In these cases, merchants remain unaware of the fraud.

Well. How often do TC40 reports lead to chargebacks?

Kount analyzed data from 88 merchants and found [1]:

• 3% of transactions under $8 led to chargebacks.
• Chargeback alerts prevented 11.3% of these fraud cases.
• 63% resulted in chargebacks.
• 43% of purchases under $8 didn't escalate to a chargeback.
• 25% of all transactions had no chargeback or prevention alert.

Once card brands have the TC40 data, how will they use it?

Summary: Merchant lacks visibility into fraud data. Banks control reporting, often handling low-value fraud internally.

How is TC40 Data Used?

Card networks will use TC40 reports to determine whether merchants are considered “high risk” due to high fraud levels.

If, for instance, Visa found excessive fraud, it would place you in the Visa Fraud Monitoring Program (VFMP).

This comes with increased chargeback fines and additional review fees to make your business compliant.

Here are the different tiers of the fraud monitoring program to illustrate what could happen:

When entering the Standard and Excessive tiers, you’ll face fines depending on the number of months in the program.

Fines depend on how long you're in the program.

The Standard tier has no fines for the first 4 months, allowing time to improve fraud rates.

The Excessive tier has an immediate $25,000 fine, increasing to $75,000 for months 10 – 12.

Being in either tier for over 12 months may result in losing Visa processing privileges.

How do Visa and Mastercard determine your fraud levels?

Visa and Mastercard determine fraud levels by comparing fraud transactions to total sales. This includes chargeback and non-chargeback fraud.

Now that we know how card networks will use this data. You should also learn how to use it.

And here’s how:

• Review reports to improve your risk management strategy.
• Use insights to enhance all business areas, not just those with chargebacks.
• Feed reports into pre-sale fraud tools for more accurate threat screening.

If your chargeback rate gets too high, you’ll need to start lowering it ASAP. One of the easier ways to get started is by using chargeback alerts.

These let you know when there’s an issue that could escalate to a chargeback. Giving you a chance to nip these problems before they escalate.

We offer such alerts and make it easy to have coverage across all major card brands. 

See how we’ve helped others lower their dispute rate.

Or consider hiring a chargeback analyst. They can interpret these reports and provide actionable recommendations based on their experience.

This approach helps you make informed decisions.

It isn’t as easy as it should be to get this data, though.

Summary: Visa and Mastercard use TC40 reports to classify merchants as high-risk for fraud.

How Can Merchants Access TC40 Data?

Merchants can access TC40 data by requesting it from their acquiring bank. However. Many acquiring banks lack automated systems for sharing this information. Making the process challenging.

Banks will not let you know when they generate these reports. Because as mentioned, they’ll create this data a lot of the time for smaller transactions.

This would use a lot of the bank’s resources.

But why?

Verifi suggests that “these files are very large” [2]. These files are also often difficult to review and transfer to the merchant.

Accessing TC40 data proves challenging.

Understanding its value requires specific methods.

Summary: Merchants must request TC40 data from banks, but it isn’t easy.

What Are the Best Practices for Analyzing TC40 Data?

Here are some of my tips to analyzing TC40 data:

• Investigate claims by comparing them to account information in your database.
• Flag transactions as fraudulent for manual review.
• Consider refunding buyers in cases of confirmed fraud to avoid chargebacks.

Speed is crucial. Rapid refunds and fraud flagging can help prevent future occurrences.

The best practices aren’t analyzing the data but knowing when TC40 claims could have been made against your business without your knowledge.

Such tips include:

• Check decline frequency for small payments.some text
  • High declines indicate rejected transactions.
• Match decline frequency to issuer.some text
  • One issuer declining suggests high-risk status.
• Compare false decline complaints to rejections.some text
  • High rates indicate excessive TC40 reports.
• Contact the bank or processor for payment issues.some text
  • They can redirect you to the card network.

What if you can get your hands on these reports?

It’s more than likely that you won’t understand everything in these reports. Because these reports contain a lot of descriptor items that card networks and banks use.

Again:

You’re better off passing that information to a chargeback analyst. Or feeding it to pre-sale fraud scoring tools.

If you want a way to prevent chargebacks, you’re better off using pre-sale fraud scoring tools, chargeback alerts, and maybe chargeback insurance.

If you want to prevent fraud, you’ll need to understand its causes to tackle it.

Let's see whether a TC40 report is the same as a chargeback.

Summary: Implement processes to investigate claims, flag fraud, and issue rapid refunds to buyers.

Is a TC40 Report the Same as a Chargeback?

No, a TC40 Report is not the same as a chargeback. A TC40 Report signals potential fraud. A chargeback is the actual money returned from the seller to the cardholder. TC40 reports help merchants detect fraud early but do not always lead to chargebacks.

Need further illustration?

Here’s what a chargeback would look like:

A customer purchases a smartphone online and receives the product. After using the phone for several weeks, they decide they no longer want it and start a chargeback. Claiming they never received the order.

This is a case of friendly fraud. Where the customer knowingly initiates a false dispute to get a free product.

And here’s an example of a TC40 report that doesn’t lead to a chargeback.

A cardholder suspects their card has been compromised and notifies their issuing bank. The bank investigates and makes a TC40 report to flag the account for potential fraud. The bank then blocks the card to prevent further unauthorized transactions.

No fraudulent charges occur. Therefore, no chargeback.

Are they a means to prevent chargebacks, then?

Summary: They’re not the same.

Can TC40 Prevent Fraud & Chargebacks?

TC40 reports cannot prevent chargebacks. However. Merchants can use these reports to find patterns that could lead to fraudulent activity on their websites.

You could also use these reports to find fraud that didn’t lead to chargebacks.

For instance, card testing fraud. When fraudsters test different cards when making small purchases.

If you can find areas to improve upon to prevent fraud, you can maybe reduce fraud. Some sources suggest that 10% of chargebacks are third-party fraud.

Thus:

They can help stop a good number of chargebacks.

This data will also include data from cases of friendly fraud, though.

If you’re concerned about preventing chargebacks, I recommend using chargeback alerts. These cover all categories of chargebacks and will let you know when there’s an issue as it arises.

Giving you a chance to refund the customer before the situation escalates to a chargeback.

We offer such alerts and make it easy for merchants to weave them into their software ecosystem. If I knew about these when I had my online store, I would have used them in a heartbeat for peace of mind…

Anyway. Check them out if you’re looking for additional ways to reduce chargebacks.

It appears you can’t do much with these reports. Why know about them, then?

Summary: TC40 reports cannot prevent chargebacks. Sellers can use these reports to help identify fraud patterns, though.

How Does TC40 Impact Merchants?

As mentioned, having too many TC40 reports can trigger placement in fraud monitoring programs. These result in additional chargeback fees, fines, and maybe the loss of your ability to process payments.

Since banks aren’t required to share TC40 data, you could have many fraud cases against you without knowing. You could suddenly find yourself in a card network’s monitoring program.

Too many TC40 reports from small instances of fraud can also lead to that. I wish I’d known about this, and it’s important for you, too.

That’s all. Let’s wrap this up with some “Q” and “A”.

Summary: Too many TC40 reports can result in fees and loss of payment processing ability.

FAQs

Do All TC40 Reports Result in Chargebacks?

No, not all TC40 reports lead to chargebacks. A TC40 report shows a fraud claim but doesn't guarantee a chargeback. Small transactions often get refunded directly by merchants or banks.

Wrapping Up

There’s not much you can do about TC40 reports. But they’re critical to know about when dealing with fraud (and chargebacks). Since this data works in the background, it could destroy your business without you knowing until it’s too late.

We can’t help you with TC40 reports. But we can help regarding chargeback prevention. See how our chargeback alerts can reduce chargeback rates by up to 90%.

Sources

• [1] Safe & TC40 Data: 6 Things You Need to Know. Kount,. 2/28/2024
• [2] What is TC40 Data? Verifi