Visa Compelling Evidence 3.0 might be the biggest game-changer for merchants in the neverending game of fighting chargebacks. Compelling Evidence 3.0 was announced in 2022, but Visa has recently changed specific rules.
With the boom of eCommerce, Visa has changed its requirements for how much evidence a business must submit to resolve customer disputes before chargebacks.
- The changes are set for April 15, 2023
- Merchants now have more evidence they can submit, which counts as criteria
- Visa has changed what they consider to be “compelling evidence”
- The liability shift back to the issuer is significant for merchants
- Visa’s Compelling Evidence 3.0 requirements can significantly reduce chargebacks by helping merchants validate their claims.
E-commerce has brought on a wave of “friendly fraud,” when customers claim they don’t recognize a purchase and notify their bank. Friendly fraud happens for the following reasons:
- Confused by billing descriptor
- Forgot about a subscription/recurring bill
- Accidental transaction (kid purchased from a device
While friendly fraud is typically accidental, some customers commit fraud intentionally to get their money back for goods and services.
To reduce all types of fraud, Visa has announced changes to its dispute program, which is set to go into effect on April 15, 2023.
This article will break down everything related to Compelling Evidence 3.0 and explain to you the importance of it for your business.
What Is Compelling Evidence 3.0 By Visa?
Compelling Evidence 3.0 is proof that the cardholder participated in a specific transaction, received goods/services, or benefited from the transaction.
The new changes make disputes invalid if the merchant can provide specific evidence.
Banks and credit card networks typically side with cardholders in the event of a dispute.
The more detailed and compelling the Evidence a merchant can present, the better a merchant or acquirer can support that the cardholder was responsible for the transaction. Compelling evidence can include correspondence between the customer and merchant, proof that the cardholder used products, delivery confirmation, or anything that can support your claim.
This is the first update to Compelling Evidence since 2015. Visa has altered the meaning of what they consider to be compelling evidence, including:
- The data elements that must match prior undisputed transactions
- The number of prior undisputed transactions
- The ages of prior undisputed transactions
- The dispute liability
Compelling Evidence 3.0 Rule Change
This is the most important part of Visa’s Compelling Evidence. Here are the changes that are set to go live in April of 2023, which have been updated from the previous 2013 rules.
Merchants can capitalize on these rule changes by working with a partner such as CB-ALERT so that you can significantly reduce their chargebacks.
At least two of the following are the same in the dispute/undisputed transactions:
- Customer account/login ID
- Delivery address
- Device ID/device fingerprint
- IP address
- One must be Device or IP Address
*Note, in the prior rules, you needed all of the criteria, not just two.
Number & Age Of Undisputed Transaction
- two transactions (Used to be one)
- 120 – 365 before the dispute processing date
- Issuer liability
Until Compelling Evidence 3.0 is live in April of 2023, merchants will need to follow the old rules for compelling evidence, including the IP address, email address, physical address, and phone number associated with specific transactions.
Merchants need only to supply one prior undisputed transaction, and the disputed liability falls on the acquirer if the issuer can provide a valid explanation.
How Will This Work for Merchants?
Merchants must submit compelling evidence against fraud claims in the pre-dispute phase when inquiries come in via Verifis Order Insight network – or after a dispute has been filed.
If you’re able to provide the required matching data elements for two transactions, Verifi will review the data and stop the dispute from going forward, squashing the chargeback.
What The Changes Mean For Participants
Below is a quick breakdown of what the Compelling Evidence 3.0 change means for all parties involved:
Sellers participating via Order Insight during pre-dispute processing:
- Reduces fraud/dispute ratios
- Reduces revenue lost to disputes
- Reduces overall dispute processing expenses
- Drives network value for sellers
Sellers Participating Via Post Dispute
- Reduces fraud ratios, not dispute ratio
- Reduces revenue lost to disputes
- Drives network value for sellers
- Avoids card re-issuance costs – pre-dispute deflection only
- Increases issue risk model performance with more accuracy
- Provides issuers with more data on cardholder behavior
- Empowers issuers with data to challenge cardholders and squash the dispute
- Accurate data and compliance program identifications
- Creates opportunities for acquirers to assist in solving friendly fraud problem
Can non-Visa issuers participate in the program?
No, the rule is only applicable for Visa transactions processed using VisaNet.
How to meet Visa’s compelling evidence requirements
Use Order Insight To Collect All Criteria
Visa has suggested all merchants start collecting CE 3.0 remedy criteria, which include the data elements of IP addresses, device ID/fingerprints, shipping addresses, and account login IDs.
Note* CB-ALERT is a partner of Order Insight and can assist here.
Implement Pre-Authorization Criminal Fraud Prevention As Well As A Post-Authorization Friendly Fraud Solution
The most common among merchants that accept CNP or card absent payments is Reason code 10.4. Implementing a chargeback prevention tool such as CB-ALERT can help stamp out fraud.
To prevent disputes on both sides of the equation, pair data from a digital fraud tool such as CB-ALERT with Order Insight and manage it from a dispute and chargeback management solution. Bringing these tools together allows merchants to send additional transaction data and more compelling evidence to customers and issuers.
Why Is Visa Changing Its Compelling Evidence 3.0 Requirements
Disputes are on the rise with the boom of card-not-present retailers. Disputes have grown over 29% since 2019, jumping from under 6 million disputes to 10 million by 2023.
The changes are being made because of the consequences of too many customer disputes and fraud chargebacks. For example, when merchants dispute to sales rate or the fraud dollar-to-sales rate passes .9% in a month, they enter the Visa Fraud Monitoring Program.
Visa’s Compelling Evidence 3.0 requirements can significantly reduce chargebacks by helping merchants validate their claims.
When Does Compelling Evidence 3.0 Go Live?
These changes will go into effect on April 15, 2023.
Merchants should prepare for this change by ensuring they’re correctly recording the data elements required by CE 3.0 and organizing it in a way that is accessible when they need to respond to Order Insight inquiries.
It would help if you also began the conversation with your acquirer and partners to see how they plan to implement these changes.
The changes are a little stricter; however, the liability has now shifted back to the issuer. Therefore, if you can provide this evidence, cardholders can no longer turn this dispute into a chargeback.