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10.3 – Other Fraud – Card-Present Environment

Visa Reason Code 10.3: Other Fraud – Card-Present Environment

For the sake of simplicity and standardization, card networks like Visa have created a breakdown of the acceptable causes for a customer to dispute a credit card charge by filing a chargeback. Each of these causes has a designated “reason code,” and banks assign the appropriate code to each case to show the given reason for the chargeback.

That sounds simple enough, but the reality is, the given reason for a chargeback may or may not be the true reason. Plus, each card network has its own set of reason codes which, while nearly the same in function, nevertheless differ from one another. Keeping track of all these codes, along with the best ways to either fight or prevent each one, is challenging.

With that in mind, let’s take a look at Visa Reason Code 10.3 Other Fraud – Card-Present Environment.

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What is Visa Reason Code 10.3?

Chargeback reason code 10.3 is part of an updated and expanded revision of the legacy codes that indicated fraud, codes which were phased out under the Visa Claims Resolution initiative. It was originally just one facet of legacy reason code 81. Now, 10.3 applies when a cardholder claims a charge—made in a card-present environment—was unauthorized. The issuer then reported the fraudulent activity to Visa.

This doesn’t necessarily mean the cardholder handed the card to the merchant at a store: a “card-present” transaction can be completed under any of the following conditions:

  • The cardholder is present at the merchant’s location
  • A representative of the merchant completes the transaction on behalf of the cardholder (Key-entered)
  • The cardholder completes the transaction directly at an unattended cardholder-activated terminal, such as an automated fuel dispenser
  • A card or contactless payment device is present (this also includes Consumer Device Cardholder Verification Methods (DVCVM)—an IOS device or Apple Watch, for example)

In addition to fraudulent transactions being completed in a card present environment, Visa reason code 10.3 may also be used when the cardholder is disputing key-entered transactions that were completed after an agreed card-present transaction. Properly disclosed charges related to a hotel stay is one example.

Merchant Errors, Rights, & Limitations

As mentioned earlier, the given reason for a chargeback may be far different from the actual reason. The cardholder who knowingly tries to file a chargeback under false pretenses commits friendly fraud. While banks try to investigate all claims thoroughly before processing a dispute, the meteoric rise in chargeback cases has made this extremely difficult. In many cases, it’s more efficient to simply take the customer’s claim at face value.

Unless they can prove friendly fraud, however, the merchant is held responsible for reason code 10.3 chargebacks. This is Visa’s incentive for merchants to update to the recommended terminal technology. The only limitation here is the timeframe: for card-present fraud chargebacks, the issuing bank has a maximum of 120 calendar days from the transaction processing date to dispute a claim.

Reason Code 10.3 Chargebacks: Prevention & Response

No matter how faithfully merchants follow the rules, there will always be people who attempt to take advantage of the system. That said, this specific type of chargeback is largely preventable with simple merchant actions:

  • For unattended terminals, always obtain the appropriate Cardholder Verification Method (CVM) such as signature/PIN or Consumer Device Cardholder Verification (CDCVM)
  • For merchants based in the US, Canada, or UK and in a high-fraud area, request a ZIP using AVS
  • Take an imprint (either electronic or manual) for every card-present transaction
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While preventative measures can significantly lower the overall volume, some illegitimate chargebacks will slip through the cracks. Merchants who have evidence that refutes a cardholder’s claim should definitely challenge the chargeback through Visa’s dispute process. Here are some steps merchants can take to make the representment process more successful:

If…

Then…

A transaction was completed at an unattended terminal… …provide specific information that demonstrates the transaction took place at an EMV PIN-compliant terminal.
The original transaction involves a card present transaction and subsequent key entered transactions were made… …provide documentation showing all transactions related to the same service and provide evidence of an imprint for the initial card present transaction.
(For disputes on transactions on or after April 18, 2020, US only) If the disputed transaction is key-entered and was not completed at a chip-reading device…. …provide evidence the cardholder previously made undisputed transactions with the same card, or provide a copy of the cardholder identification and a signed copy of the receipt or contract.
You have already processed a reversal, or issued a credit for the transaction... …provide documentation of the credit reversal, including the amount of the credit and the date it was processed.
The cardholder no longer disputes the transaction… …provide a letter, email, or other documentation from the cardholder that clearly states they no longer.

Take a Wider View

Invalid chargebacks from Visa Reason Code 10.3 can be disputed if you are using up-to-date equipment and take a card imprint of every single transaction that is manually entered into the terminal, but it’s much more efficient to take a proactive stance. The same is true of the other chargeback reason codes, as well. A truly effective chargeback management strategy must encompass prevention as well as disputing cases of friendly fraud.

Chargebacks911® can help your business manage all aspects of chargeback reason codes, with proprietary technologies and experience-based expertise. Contact us today for a free ROI analysis to learn how much more you could save.

 

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