TC40 DataWhat This Report Can — and CAN'T — Tell You About Your Risk Status

TC40 Data: Limited Uses for Chargeback Reduction, but Valuable in Other Ways?

Every merchant wants to uncover “the secret” to eliminate chargebacks, once and for all. Some even believe they’ve found it in the form of TC40 data. But, are they searching in the right place?

The truth is that TC40 data has far more to do with fraud than it does with chargebacks.
Not only is this data not intended (or likely) to help you prevent chargebacks, but it doesn’t even focus on them in the first place. So, what is TC40 data? What’s the reason for all the confusion surrounding TC40 reporting?

What is TC40 Data?

TC40 Data

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A TC40 data claim occurs when a customer makes a fraud claim against a merchant. The issuer generates a claim, then transmits it to the merchant’s acquirer, as well as to Visa, as a means of noting all reported fraud incidents tied to the merchant.

TC40 data is used to inform banks and card networks when a merchant has an outstanding fraud claim against their business. In addition, the data report will contain internal communication data shared between banks and credit card companies.

This could make interpreting chargeback data less complicated for merchants, but it isn’t likely that they’ll ever see the report. It's also not likely that they'll ever immediately know a TC40 report was filed against them.

Essentially, TC40 data is used to determine a merchant’s ultimate fraud risk. Exact calculations and thresholds are not published, but as a general rule, the more fraud claims against you, the more likely your acquirer is to view you as “high risk.” If this happens, the bank may refuse to accept payments on your behalf.

Visa TC40 Data vs. Mastercard FLD Data

Each card brand has its own compliance program: Visa has its Risk Identification Service (RIS), while Mastercard has the Fraud and Loss Database (FLD). The latter replaced the System to Avoid Fraud Effectively (SAFE) program, which was decommissioned in October 2020.

The Mastercard FLD platform is its card-specific repository for fraud transactions. It serves as the source of truth for fraud information within the enterprise. As mentioned below, this platform currently provides multiple channels for submission and management of fraud records:

• Traditional Global File Transfer (GFT) mechanism for batch submissions.
• Manual online search and submission by users through Mastercard Connect™.
• File upload (Complete and Minimal record options) through Mastercard Connect by users preferring the bulk upload mechanism.

A standard TC40 data claim report includes a few key elements:

• Merchant identification information
• The banking information attached to both the cardholder and the merchant
• Transaction details, i.e., where the transaction took place, items purchased, etc.

Information in the data claim report lets you see which customers claimed fraud against you. This could be useful information, right? Well, maybe not.

Merchant Access to TC40 Data is Limited

Merchants will not typically be notified when an issuer generates a TC40 claim. You can request a report from your acquirer, but neither your acquirer nor your processor is required to share these reports with you.

TC40 reports are often massive files. This can make them difficult to transmit and review. Also, the report will contain descriptor items (for internal use by banks and card networks), which can be confusing.

Speaking of confusion, it’s also important to understand that not every TC40 data claim will result in a chargeback. Take small dollar-value transactions, for instance; in many cases, the cost of filing a chargeback can be greater than the value of the transaction itself. In these cases, banks often choose to refund the customer directly and write off the loss.

Issuers still submit TC40 data claim reports when they write off transactions. These reports will still count as a strike against you, even if you’re not notified. This is in contrast to a chargeback, where you will be notified and may challenge the claim if it’s invalid.

Consequences of TC40 Data for Merchants

TC40 data reports are filed when merchants are reported by consumers for fraudulent transactions. Of course, an elevated number of such reports is going to look bad for any merchant, even if few of these disputes eventually become chargebacks.

In order to process customer payment requests, banks and card networks consistently evaluate a merchant’s risk profile. Therefore, TC40 reports are a method for relaying all known fraud claims against a merchant to the bank or processor that is responsible for that merchant account. Depending on the frequency and severity of the fraud claims levied against that merchant, banks may decide to warn the merchant of their impending high-risk status or simply eliminate that merchant’s ability to process payments at all.

Unlike chargeback notifications, banks and card networks are not required to share any of this information with you. Odds are, you might not be aware that you’re at risk of losing your payment privileges until it’s already too late.

How Do I Know When TC40 Reports Get Submitted? Here’s 4 Tips.

You have no power over the exchange of TC40 data reports. Also, neither banks nor card networks are obligated to share those details with you. They could if they wanted to (but they probably won’t). Thus, it’s up to you to glean if you have reports floating around before the worst happens.

Thankfully, there are a few tricks you can learn to determine whether or not TC40 claims have been filed against your business:

• Take a look at your decline frequency for lower-dollar payments. If the declines begin to outpace approvals, this is a possible indication that transactions are being rejected.
• Match decline frequency to the issuer. If only one issuer is declining transactions, it’s likely your business has been flagged as high-risk.
• Take a look at the number of false decline complaints you receive from customers, and compare them to the number of total rejected transactions. If this figure is relatively high, it could be the result of excessive TC40 reports.
• Merchants are fully empowered to reach out to their bank or payment processor to inquire if they have any information regarding any payment irregularities. If the processor is unable to answer your question, they will redirect your inquiry to the card network or bank that can.

Does TC40 Data Affect Chargebacks?

No. Also, to be clear, TC40 chargebacks don’t exist, and TC40 data doesn’t really have an effect on chargebacks one way or the other.

TC40 data sometimes misinterpreted as a way to proactively prevent chargebacks. But, as we outlined above, they’re cumbersome and usually inaccessible. Thus, they’re not a reliable chargeback indicator. Also, while data claims are usually released within a few days after a fraud report, they don’t stop chargebacks from being filed.

Unfortunately, some providers offer chargeback alerts based on TC40 data claims. This is a fundamental misunderstanding of chargeback sources, though, which attributes all chargebacks to criminal fraud. In reality, criminal fraud makes up less than 10% of chargebacks. Alerts based on these reports would be less than useless against non–fraud disputes.

Keep in mind you may receive a chargeback for a particular disputed transaction, whether or not you have knowledge of a TC40 report or not. Either way, the data cannot be used by merchants to prevent or avoid chargebacks. The two situations simply have nothing to do with each other.

However, that isn’t to say that knowledge of active TC40 reports can’t be beneficial at all. Once you are aware that these reports are being filed against you, you can use that information to create or optimize an effective chargeback prevention strategy.

Learn more about chargeback prevention

Preventing TC40 Claims (and Chargebacks)

Your best bet is to prevent bank inquiries and disputes whenever possible. In order to accomplish this, the first thing you should consider is investing in effective fraud tools. Thesemust be designed to identify fraud before a transaction can be completed.

Advanced fraud tools can drastically reduce your fraud risks and, by extension, decrease the amount of TC40 reports against your business. Any combination of these tools can be effective against fraud:

When it comes to chargebacks, some card networks offer automated response programs that can provide additional transaction information in real-time. If a cardholder has a question about a charge, tools like Order Insight or Consumer Clarity allow sellers the opportunity to resolve disputes before they become chargebacks.

Aside from these, adopting a few best practices can make all the difference between escalating disputes and happy customers. These include:

Chargebacks911 offers the most comprehensive chargeback management services and products available on the market today. No other provider can deliver our level of transparent, end-to-end chargeback management, going beyond prevention to revenue recovery and future growth.

No matter what you need to prevent chargebacks: we can help. Contact us today for a free demo.