Can TC40 Data Help You Prevent Fraud & Chargebacks?
Every merchant wants to get a leg-up in the fight against fraud and chargebacks. Some believe that TC40 data is the “silver bullet” that can help stop chargebacks before they happen. The truth is a lot more complicated than that, though.
- TC40 Data
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 the card networks like Visa and Mastercard, as a means of noting all reported fraud incidents tied to the merchant.
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.
The reports are compiled and used by Visa and Mastercard as part of their programs to manage fraud. Each brand has its own compliance program: Visa has their Risk Identification Service (RIS), while Mastercard has the System to Avoid Fraud Effectively (SAFE) program.
The TC40 can help identify merchants with unusually high fraud levels, and take action in response. As outlined in the Visa eCommerce Merchants’ Guide to Risk Management, for example, merchants may be “identified by RIS and may lose their chargeback protection until corrective measures are put in place.” This is true even if few, or any, of these reported incidents, ultimately result in chargebacks.
Acquirers use these reports to judge merchant risk profiles. Exact calculations and thresholds are not published, but as a general rule, the more TC40 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.
Can You View Your TC40 Data?
Information in theTC40 data claim report lets you see which customers claimed fraud against you. This could be useful information, right? Well, maybe not.
As a merchant, you 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 TC40 reports with you.
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TC40 reports are often massive files, which 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 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 typically refund the customer directly and write-off the loss.
Issuers still submit TC40 data claim reports when they write-off transactions, however; it 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.
TC40s Have No Real Chargeback Impact
TC40s are sometimes misinterpreted as a way to proactively prevent chargebacks. But, as we outlined above, they’re cumbersome and usually inaccessible and are not a reliable chargeback indicator. Also, while TC40 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, meaning alerts based on TC40s would be mostly useless.