Visa Compelling evidence 3.0
Having convincing evidence is crucial in the chargeback process, stronger the evidence, higher the probability of winning the chargeback.
One such important part of the action is through a representment package that holds documentary evidence disapproving the chargeback claim, also known as Compelling Evidence. It is a set of documents that proves the validity and legitimacy of the transaction during the chargeback cycle.
Initially, the need for compelling evidence was not very prominent as chargeback claims were often centred around criminal fraud. But as technology geared towards a big change in way we shop aka the spur of online shopping, there was a considerable increase in friendly fraud.
It is an instance where the cardholder disputes a legitimate transaction, and the presence of friendly fraud has been evident from the Sift’s Q4 2021, Digital Trust & Safety Index survey where about 23% of cardholders admitted to committing friendly fraud.
And to combat this rising friendly fraud, Visa released Compelling Evidence 3.0 (CE 3.0) guidelines in April 2023.
What is Visa CE 3.0 and why was it implemented?
Visa’s Compelling Evidence 3.0 is a revised guideline that issuers, acquirers, and merchants, can use more extensively to prove that the chargeback filed was fraudulent. It offers a standardized structure for parties involved in the chargeback process to share information and support their claims.
The main moto behind the implementation of CE 3.0 is to combat the disputes raised because of friendly fraud. The primary objective of CE 3.0’s execution is to deal with disputes that are associated with Visa reason code 10.4: Fraud-card-absent environment, which relates to “First party fraud or friendly fraud”.
Why CE 3.0 was implemented?
- To combat the rising friendly fraud
- To make the chargeback process more transparent and effective.
- To prove that the transaction was made by cardholder and not an unauthorized party.
- To prevent unwanted chargebacks rising from friendly fraud.
Visa CE 3.0 rules:
The revised CE3.0 guideline mandates that sellers must exchange information that establishes a footmark of prior purchase history by sharing two prior transactions that satisfy specific requirements, such as:
- The payment must be at least 120 days old (from the dispute date) and not older than 365 days.
- Transactions previously flagged as a fraud are ineligible.
- Transactions must be done with the same merchant.
- One of the two essential data elements that must match between the disputed transaction and prior transactions is either the IP address or the Device ID/Fingerprint.
Core data elements needed for Visa CE 3.0:
- User ID
- IP Address
- Shipping address
- Device ID
How CE 3.0 works?
Step 1: The cardholder stipulates that the transaction was a fraud, the issuer initiates the dispute and categorizes it under chargeback reason code 10.4.
Step 2: Merchant receives the dispute through acquirer and review the purchase history of cardholder.
Step 3: If that history shows a record of two or more transactions processed at least 120 days ago (but not more than 365 days) ago and validates them as not disputed, the next step follows.
Step 4: The analysis of two core data elements that are identical in prior transactions will also be evaluated and sent to the acquirer.
Step 5: The issuer will then review the package and the data presented. If those details match with the cardholder’s information, it will be categorized as friendly fraud.
Advantages of CE 3.0
Chargebacks still perplex the involved parties, so implementing CE 3.0 may serve as a bedrock for mitigating the increased cases of friendly fraud chargebacks. Execution of CE 3.0 will result in a number of advantages such as:
- Can reduce the number of chargebacks as well as the revenue loss associated with it.
- Fraud ratio will decrease substantially.
- The CE 3.0 framework is meant to capture fraudsters who previously abused the infinite window to submit a chargeback on a prior transaction.
- It also covers services that offer digital delivery options without a physical delivery address. E.g.: ridesharing, dating apps etc
Any friendly fraud pain points that are still costing money can be handled more precisely if the CE 3.0 framework is implemented effectively.
Conclusion:
In a nutshell, to dispute a chargeback effectively, the merchant must submit appropriate compelling evidence to prove that the charge was legitimate, and it wasn’t a fraud. Even though the requirements of CE 3.0 may be stringent, implementing it properly can reduce the chargebacks effectively and protect the revenue of involved parties even more.
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