What is Visa Claims Resolution & Did It Help With Disputes?

As an online seller, I want to understand how chargeback processes work. Although VCR was introduced a while ago, I still find it interesting to compare it to the old Visa dispute process.

This guide will explain what VCR is, what was added, and how it impacted merchants.

Let’s start with what it is.

Key Takeaways

• VCR aims to make the dispute process easier.
• Chargebacks have reduced by up to 18%.
• Time spent on disputes increased to 40 minutes (up from 20).
• Sellers have less time to respond to chargebacks.
• 17% more sellers now fight disputes due to VCR.

Would you prefer to avoid chargebacks? Consider using chargeback alerts. We provide easy access to alerts from all providers.

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What is the Visa Claims Resolution?

Visa Claims Resolution (VCR) streamlines chargeback and dispute workflows. Launched in April 2018, it automates processes for merchants, issuers, acquirers, and processors. VCR aims to reduce resolution time, prevent invalid disputes, and standardize rules.

It introduced 2 key improvements:

• Automated workflows
• Simplified reason codes

VCR uses transaction data to block invalid disputes before they enter the system. Cutting down on processing time and costs.

The old 22 reason codes were reduced to four dispute categories. This change helps all parties understand and process claims faster.

Other changes include reducing the merchant response time from 45 to 30 days. VCR also enforces stricter evidence requirements for fraud and authorization disputes.

These updates lead to faster resolutions and more accurate dispute filing.

Is it effective?

As of 2018, Chase Merchant Services reported a 7 – 10% drop in disputes. A 2019 white paper I found showed a 15 – 18% reduction in chargebacks [1].

That’s the gist of it. Let’s move onto what changed and why.

Summary: VCR changed the chargeback process.

What Changed & Why?

Here’s what changed with VCR:

• Dispute flow: Whether the dispute is automated.
• Process improvements: Better communication and automation.
• Timeframes: Shortened to 30 days.
• Term changes: New terms introduced.
• Reason code changes: New categories added.

We’ll dive deeper into these changes in the following sections.

Let’s begin.

1. Dispute Flow

VCR introduced 2 workflows: Allocation and Collaboration.

Allocation uses Visa's data and automation to assign responsibility without manual intervention. It mostly applies to fraud and authorization cases.

The Collaboration workflow handles disputes requiring both parties’ involvement. This is common in processing errors and consumer disputes.

Allocation vs. Collaboration

Here’s how Allocation and Collaboration differ:

1. Allocation:

• 18 days to respond
• Handles fraud and authorization disputes
• Uses automated clearing house data
• Automated decision-making
• Quicker resolution
• Less manual intervention
• 13% fewer fraud chargebacks and 18% fewer no-authorization disputes

Visa uses its records to decide who’s liable, the issuer or the merchant.

• If the issuer is liable, the case closes, and the cardholder or bank pays.
• If the merchant is liable, they accept responsibility or proceed to pre-arbitration.

This method reduces dispute workloads by blocking invalid claims upfront.

For merchants, it means fewer chances to respond. The process emphasizes speed over extended exchanges.

As of July 2018, 85% of chargebacks went through this path [2].

2. Collaboration:

• 24 days to respond
• Manages processing errors and consumer disputes
• More complex cases
• Requires evidence and review
• May involve manual investigation
• Allows dialogue between parties
• 5% fewer duplicate processing chargebacks

In this model, the issuer, acquirer, and merchant work together to resolve the dispute.

The issuer submits the claim to the acquirer, who forwards it to the merchant. The merchant can respond with evidence to challenge the dispute.

If unresolved, the case can move to pre-arbitration or arbitration.

Unlike Allocation, Collaboration allows both sides more chances to investigate and provide evidence.

Visa’s goal with Collaboration is to keep the process open, where both parties can argue their case and reach a decision. This method supports disputes related to customer claims or processing errors.

2. Process Improvements

One major change is the shift to automation.

Visa Resolve Online (VROL) automates some cases, especially within the Allocation workflow. This reduces manual steps and speeds up resolutions.

This reduces manual steps and speeds up the resolution process.

Another improvement is the standardization of reason codes. This makes it clearer why disputes are raised.

Real-time notifications ensure all parties receive updates quickly, improving communication throughout the process.

The goal is to reduce delays and streamline dispute handling for merchants and issuers.

3. Timeframes

Before VCR, resolving chargebacks could take over 45 days. VCR shortened this to 30 days, speeding up the entire process.

4. Term Changes

The most notable change is replacing the term “chargeback” with “dispute.”

Otherwise, here’s what else they changed:

They also added new terms, like:

• Dispute Category: How reason codes are categorized (e.g., fraud, processing errors).
• Transaction Inquiry: When VROL checks which orders the customer is disputing.
• Collaboration: Legacy chargeback process.
• Allocation: Automated responsibility assignment for chargebacks.
• Associated Transactions: Related transactions information.

5. Reason Code Changes

The old system had 22 reason codes. VCR expanded these into 24 dispute conditions, which fall under these categories:

1. Fraud (10)
2. Authorization (11)
3. Processing error (12)
4. Consumer disputes (13)

The numbers beside each category are the 2-digit codes used to identify them.

Here’s what the reason codes are:

Screenshot from Visa (PDF)

See our Visa reason codes guide for details.

Each condition now provides clearer guidelines for identifying and processing disputes. This helps merchants and issuers submit more relevant evidence.

What would the process of submitting this information be like?

What is the New Chargeback Process for Visa?

The new process starts with a Pre-Dispute. This happens when the cardholder submits a complaint, but the merchant hasn’t received a chargeback yet.

Issuers will check if the merchant uses RDR or CDRN, then submit the pre-dispute to Visa Resolve Online (VROL).

If the seller doesn’t use Verifi’s tools, Visa routes the pre-dispute through the Allocation and Collaboration workflows.

This is where the chargeback process begins.

Learn more about Visa’s chargeback process here.

If the merchant does use Order Insight, RDR, or CDRN, the pre-dispute’s routes to Verifi.

When you use Order Insight, the system sends transaction details to the issuer automatically. This may prevent customers from pursuing the dispute if they remember their order.

If you use RDR, the system checks if the order qualifies for an automatic refund.

With CDRN, you have 72 hours to either:

• Refund the customer
• Decide whether to proceed with a chargeback

Using CDRN and RDR can stop chargebacks, helping you avoid chargeback-related issues. High chargeback rates can lead to penalties, like being placed in Visa’s Dispute Monitoring Program.

Since the chargeback never happens.

I could write 10,000 words on these programs, but you’ll need to explore these guides for more details:

• Chargeback Dispute Resolution Network (CDRN)
• Rapid Dispute Resolution (RDR)
• Order Insight
• Chargeback alerts (what CDRN and RDR are)
• Visa Resolve Online
• What Verifi is

Here’s a visual on how this process will work:

You may wonder how to get RDR and CDRN.

You’ll need to contact Verifi to get started. However, that means you won’t have access to Ethoca Alerts for Mastercard transactions.

That’s when you should consider a reseller (like us). We offer access to all alerts.

How does this process affect sellers, though?

How Did Visa Claims Resolution Affect Merchants?

Visa Claims Resolution improved efficiency for merchants by streamlining dispute handling. It reduced chargeback timeframes, automated processes, and minimized invalid disputes. This allowed quicker resolutions, lowered costs, and enabled merchants to focus more on core operations.

The biggest change is in your response time:

• You have 24 days for Collaboration disputes
• You have only 18 days for Allocation disputes

Missing these deadlines means automatic loss and extra fees

To avoid this, adjust your daily operations. Keep better sales records, monitor disputes, and quickly decide if you’ll fight a chargeback.

Staying on top of this will keep you out of trouble with Visa.

The automated system makes dispute handling easier, but you must meet the deadlines.

Many businesses save time once they adapt to the new process. Clearer dispute reasons also help you explain issues to customers better.

It also encourages merchants to challenge more chargebacks.

A study suggests that 17% of merchants fight chargebacks after VCR reduced the manpower needed to handle disputes.

However…

A white paper I found (linked in my sources) suggests the following negative effects after VCR:

• Issuing banks don’t always tell merchants why they lost disputes
• Time spent fighting disputes increased from 20 to 40 minutes
• Merchants must acknowledge chargebacks or face penalties
• Not all issuing banks use VROL

I couldn’t find a percentage of banks that use VROL. However. 83% of international and 97% of US issuers have adopted RDR. And RDR is under VCR.

This should give us a benchmark.

Is there anything to consider when dealing with disputes under this new system?

Summary: Respond to disputes ASAP to avoid losing chargebacks.

Wrapping Up

Visa Claims Resolution has reduced chargeback rates for many merchants. Though it has added some inconveniences. Despite this, the system is an improvement due to added automation.

A big benefit is access to tools like RDR and CDRN.

However, these require going through Verifi, which means no access to Ethoca Alerts. Alternatively, you can go through us to get all three alerts.

Learn more now.

Sources

• [1] The Impact of VCR. ChargebackGurus.
• [2] Dispute resolution changes for merchants. J.P. Morgan. 07/2018. PDF.