Thursday, June 1, 2023
Visa's Compelling Evidence 3.0 guidelines (CE 3.0 for short) expands the list of compelling evidence that a merchant can submit to their acquirer when challenging a chargeback based on claims of fraud. This might include, for example, details of prior uncontested transactions made by the same cardholder on the same website.
From the merchant's perspective this would seem an obvious piece of evidence that a chargeback is questionable. But Visa rules hadn't addressed the possibility, until now.
"CE 3.0 evolves the Visa dispute program by adding a set of checks and balances to draw a clear and direct relationship between the merchant and the cardholder with the use of greater data exchange, and more accurately identify transactions authorized by the cardholder, not an unauthorized party," Visa wrote.
"This changes the game for a lot of merchants," said Scott Adams, CEO at Fraud Deflect, a platform Adams developed to help CNP merchants predict, prevent and prevail against friendly fraud.
Chargebacks are a growing problem for CNP merchants. The Merchant Fraud Journal, an independent publication dedicated to empowering online sellers to greatly reduce the impact of ecommerce fraud, anticipates merchants will be confronted with over $100 billion in chargebacks this year.
Ecommerce merchants have been especially hard hit, as more shoppers (and fraudsters) flock to online stores. Visa reported that CNP transactions across its network grew 51 percent globally between 2019 and 2021; CNP chargeback disputes grew nearly 30 percent over that same period. Chargeback mitigation firm Sift said it saw a 35 percent increase in chargeback rates between the first and third quarters of 2022.
No definitive data exists on how many chargebacks involve friendly fraud (also known as first-party fraud). However, some reports suggest as many as four out of 10 disputed card transactions are bogus claims.
A survey of just under 1,200 adults conducted last fall for Sift revealed that nearly one in four (23 percent) had filed a fraud dispute for a card transaction they made even though there was nothing wrong with the product. "And because this only represents self-proclaimed first-party fraudsters, the real figure is likely much higher," Sift wrote in its Q4 2022 Digital Trust & Safety Index report.
In a recent bulletin, Visa explained that a cardholder claim of fraud will be rejected when the merchant uses the pre-dispute option to submit specific information that makes its case.
For a transaction to qualify for CE 3.0, the merchant must show that at least two transactions using the same card were settled at least 120 days before the dispute date. (Obviously, transactions previously disputed don't qualify.)
Alternatively, they can provide information revealing that a disputed order originated from the same IP address, or a device with the same ID, as one or more orders received (and not disputed) over the previous six months.
Additionally, the merchant must provide one of the following: data showing that the same card was used to pay for purchases using the same website logon, or had the same shipping address as past, undisputed orders. 
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