Can Rapid Dispute Resolution From Verifi Help You Avoid Chargebacks?
No merchant likes product returns. That said, a return is better than a chargeback, any day. With Rapid Dispute Resolution (RDR), you now have the opportunity to issue credits to customers automatically and in real time. This means customers get a permanent resolution in seconds, while you avoid many costly chargebacks.
RDR is currently live and available to all Visa sellers and acquirers. As of April 19, 2021, RDR is active for all Visa issuers as well, unless they opt out by submitting a form to Visa Resolve Online (VROL).
There are no major changes to be made by merchants to prepare for RDR. However, there are several updates that needed to be made by acquirers to be able to support the service, while issuers needed to implement some process changes and training. This will be worthwhile, though, as participating institutions can offer an improved customer experience while reducing operational expenses.
In this post, we’ll take a look at the details behind Rapid Dispute Resolution. We’ll also see what still needs to be done to ensure a smooth, consistent transition to implement new payment dispute practices.
- Chargeback Alerts: The Merchant's Guide for 2022
- How Proxy Piercing Can Help Prevent eCommerce Fraud
- Fraud Scoring: A "Must-Have" Tool for Fraud Management
- The Top 10 Fraud Detection Tools You Need to Have in 2022
- Payment Authentication: How to Verify Buyers Before a Sale
- How Do You Find the Right Chargeback Management System?
What is Rapid Dispute Resolution?
- Rapid Dispute Resolution
Rapid Dispute Resolution (RDR) is a new product from Verifi. RDR allows merchants to create rules and set parameters that dictate which disputes they’d like to automatically accept and provide funds back to the cardholder, thereby preventing a chargeback for these transactions at the pre-dispute stage.
Rapid Dispute Resolution is intended to help merchants and issuers enhance the customer experience, reduce disputes, and improve operations.
When an RDR-participating issuer submits a dispute for a transaction with an RDR-participating merchant, that dispute is at a stage called a pre-dispute. This is because the case hasn’t yet escalated to a chargeback. It’s at this pre-dispute stage that RDR gives you, as a merchant, time to decide whether to credit the customer their money back in order to permanently avoid the chargeback.
When a pre-dispute is resolved with RDR, a credit goes to the cardholder using Visa's existing dispute financial messaging. In essence, there is no dispute because you accept liability. Any transaction resolved with RDR will be identified as an RDR-resolved transaction, not as an actual dispute, meaning your dispute ratio will not be negatively impacted.
The goal is to make it easier for banks to serve their clients in a quick, effective manner. According to a release published by Visa, the move to this new system should be a smooth, simple process for issuers. “There are no required VROL system changes,” the company asserts, “but issuers should review their internal processes to determine if any impact to processing exists.”
There are a number of changes that will need to be made on the acquirer's end for RDR participation, like reclassifying some data and developing systems to distinguish the newly-created RDR classification from disputes. RDR-resolved transactions can’t be identified as disputes in any billing system, invoice, or statement. These changes were communicated to acquirers in 2020 and were largely complete to meet the global RDR activation in April 2021, though.
It's also important to note that RDR is sometimes mistakenly referred to as "Visa Rapid Dispute Resolution." In reality, the tool is actually a Verifi product that is intended to help better serve issuers and acquirers with transactions conducted on the Visa network.
How Can RDR Help Merchants?
So, if Visa Rapid Dispute Resolution is primarily a bank-facing mechanism, what will implementation mean for you as a merchant?
The most obvious benefit is that RDR can help reduce chargeback issuances. To illustrate, let’s assume a customer disputes a transaction. Rather than going directly to the chargeback process, the RDR decisioning engine checks the dispute against preassembled rule set (determined by you). This allows the system to determine if you should accept liability for the dispute and provide a credit. If you accept liability, then the case is closed, and you avoid the chargeback permanently.
The rules you use to determine which disputes to refund are highly customizable. You can base them on a variety of factors, including:
- Transaction value
- Original transaction date
- Chargeback reason code
- Currency code
- Card issuer BIN
To illustrate, let's say you want to automatically credit any dispute for transactions under $10 in a certain currency code (like US Dollars). You can create that rule and let the system automatically carry out that function. Another benefit of RDR is the near-touchless experience; you can effectively "set and forget" about these rules. You won’t have to touch them again unless you decide they need an adjustment.
Using these rules, RDR can automatically refund the transaction on your behalf, letting you avoid a chargeback. This will make it easier to avoid breaching Visa chargeback thresholds (0.9% chargeback ratio and 100 chargebacks per month).
In this way, RDR is a great innovation, particularly if you’re concerned about potentially exceeding Visa’s allowable chargeback limit. Even if you’re already in violation of Visa’s chargeback thresholds, RDR will let you get your chargeback situation under control in a very short period of time.
|Benefits of RDR:|
|+ Automate processes|
|+ Customize your fraud rules|
|+ Prevent chargebacks|
|+ Reduce false positives|
|+ Reduce friction|
|+ More sales and higher conversion|
Important Points to Know About RDR
Rapid Dispute Resolution can be a great asset for you as a merchant. There are some circumstances to consider, though.
First, the rules associated with RDR effectively exist to help you determine which disputes you want to automatically refund, and which you want to progress to the chargeback stage. You might be thinking: why would I want any chargebacks to happen? Well, you need to remember that if an illegitimate dispute progresses to the chargeback phase, you have the opportunity to fight back and recover your revenue through the representment process.
A buyer who knows how to manipulate the system by making false claims can bypass you to obtain an automatic refund after a transaction (a practice called "cyber shoplifting"). And, since there’s no chargeback to represent, there’s no opportunity to challenge the buyer’s claim. With the benefit of reporting, you can enhance fraud screening by blocking future uses of the card. Still it's an important point to keep in mind when setting rules for which charges to automatically refund.
Based on a survey of over 400 merchants, the report presents a comprehensive, cross-vertical look at the current state of chargebacks and chargeback management.Access the FREE Report
Also, you’ll receive daily updates on refund information from Visa. This data can't help you recover money from transactions that have already been overturned; however, it will be useful to help adjust your rules for the future. Pay close attention to this information, and remember to make periodic changes as needed.
You also need to ensure that you're capable of reconciling this new refund data if you’re using a CRM or legacy system to manage customer data. Transactions cannot be credited through RDR and then resubmitted as a dispute. However, if data is handled improperly on your end, it could result in double refunds or other mistakes. This could necessitate further investment on your part.
Making RDR Work for You
Rapid Dispute Resolution can be a great asset in the fight against chargebacks. This is especially true if you fall into any of the following categories:
- You’re close to breaching—or have already breached—the Visa chargeback threshold
- You’re currently enrolled in the Visa Chargeback Monitoring Program
- You operate in a high-risk vertical or sales model
- A significant share of your transactions are for low-ticket items
You need to carefully consider which rules you want to apply for those automatic refunds if you decide to take advantage of RDR. You can’t fight a dispute that has a legitimate basis in a criminal fraud or merchant error, so it’s best to refund these. This requires customized rule sets that are tailored to your unique needs as determined by your own transaction data.
Even after entering the program, it would be wise to keep tabs on your refund rate. If you see refunds start to spike and exceed your comfort level, and you’re not in immediate risk of exceeding chargeback thresholds, you should refine your RDR rules.
You could also consider working with a third-party to help make RDR work for you. The chargeback management experts at Chargebacks911® have decades of experience navigating complex industry regulations and practices. We can help you optimize your Visa Rapid Dispute Resolution rule sets to prevent chargebacks while avoiding unnecessary refunds. Want to learn how much you could save? Click below and get started today.