Earlier this fall, Visa announced the “evolution of its dispute program”, helping merchants fight what’s commonly known as fight fraud or first-party misuse for card not-present transactions.
The change could save small merchants “over a billion dollars in losses globally over the next five years”, benefiting the entire marketplace, both consumers and merchants alike.
What is changing
Visa’s dispute program rule change gives merchants more ways to prove that a disputed charge was in fact authorized and not fraudulent, helping businesses keep money that they earned fairly, while safeguarding regular cardholder activity.
For small businesses, first-party fraud can be catastrophic; affecting their bottom line as they are on the hook for refunding the amount paid, loss in overhead costs like shipping and handling, processing fees, and time. On top of that an additional chargeback fee must be paid.
In their announcement, Visa highlighted Kaseedee Pilarz, calling the rule change a “game changer” for her businesses as she’s had customers dispute “legitimate membership charges”, stating that if she loses the dispute, she's not only lost the membership fee, she is also penalized. For Pilarz, “That can be the difference between making payroll or not. This change will help ensure I have a fair shot during those disputes.”
“The change we’ve made to our dispute process is an important part of our strategy for fighting all types of fraud on the Visa network,” said Paul Fabara, Chief Risk Officer, Visa.
“The dramatic rise in first-party fraud rates necessitated this change. We’re proud of the work that we do, not only to prevent fraud across the ecosystem, but also to empower small merchants to fight for payments they’ve rightfully earned through legitimate transactions. With this announcement, however, we also remain steadfast in our commitment to protecting innocent consumers from fraud, including Visa’s overall commitment to zero-liability for cardholders for unauthorized transactions.”
“Without the kind of resources that larger organizations have, small businesses are significantly more at risk for debilitating fraud-related losses. Mitigating first-party fraud requires collaborative partnerships,” said Julie Fergerson, CEO, Merchant Risk Council
According to PYMNTS Intelligence, fraud rose by 43% compared to 2022, with fraud getting more expensive at an increase of 65% on average.
Visa’s rule change seems like a necessary step towards the future in the battle against fraud as we enter an ever growing market with more variables and opportunities for fraud.