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10.4 – Card-Absent Environment

Visa Reason Code 10.4: Other Fraud – Card-Absent 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 transaction 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 Chargeback Reason Code 10.4 Other Fraud – Card-Absent Environment.

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What is Visa Reason Code 10.4?

Chargeback reason code 10.4 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 one of several possible scenarios covered by legacy Visa reason code 83. With the overhaul of their reason code system, Visa divided reason code 83 into multiple different codes, including 10.4.

Visa chargeback reason Code 10.4 applies when a cardholder disputes a credit card charge made in a card-not-present environment. The cardholder claims they did not authorize or participate in the transaction, which took place online, over the phone, or through the mail.

It’s easy for a cardholder to forget a purchase between the time of the transaction and receipt of the credit card statement. The buyer should contact the merchant about the charge at that time. Instead, many simply call their bank and dispute the charge, leading to a card-absent fraud code chargeback.

It’s also common for cardholders to believe a transaction is fraudulent because they don’t recognize the merchant’s billing descriptor. If they don’t recognize the transaction or the merchant, they really have no recourse but to call the issuer. This can lead to another process through the Visa Merchant Purchase Inquiry (VMPI).

Merchant Errors, Rights, & Limitations

Chargebacks of any kind are nothing but trouble for merchants…yet many chargebacks are the direct result of preventable merchant missteps. It’s crucial for businesses to recognize common merchant errors that can lead to 10.4 chargebacks:

  • The merchant did not request authorization for mail or telephone order, online order, or a recurring transaction.
  • The merchant did not employ available verification tools such as Visa Secure and Address Verification Service (AVS)
  • The merchant did not obtain secondary verification, such as a PIN or CVV2 code
  • The merchant mistakenly marked a card-absent transaction as a card-present transaction (or the other way around)
  • The merchant utilizes a confusing or unclear billing descriptor

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.

This puts the cardholder in the driver’s seat. The only limitation here is the timeframe: for reason code 10.4 chargebacks, the issuing bank has a maximum of 120 calendar days from the transaction processing date to dispute a claim.

Reason Code 10.4 Chargebacks: Prevention & Response

No matter how faithfully merchants follow the rules, there will always be people who attempt to take advantage of the system. While no one can prevent customers from claiming a transaction is fraud after the fact, there are steps merchants can take to fight back against invalid claims:

  • Always request authorization for eCommerce (including mobile orders), mail orders, telephone orders, and recurring transactions, regardless of the customer or the dollar amount of the order.
  • Take advantage of available risk management tools such as Visa Secure, CVV2, and Address Verification Service (AVS).
  • Implement third-party pre-sale fraud filters that help verify the customer’s identity
  • Always use clear billing descriptors that clearly identify your company
  • Clearly and properly identify card present and card absent transactions

 
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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…

The card was authorized through Visa Secure… …provide evidence that the transaction was authorized by Visa Secure at the point of sale.
If you attempted to authenticate the cardholder’s identity through Address Verification Service (AVS), but the issuer does not participate in the program… …provide documentation that demonstrates you attempted to verify cardholder data at point of sale.
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 dispute the transaction.

Take a Wider View

Invalid chargebacks from Visa Reason Code 10.4 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. As with other chargeback reason codes, however it’s much more efficient to take a proactive stance. 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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