When is the 10.4 dispute type raised and what is friendly fraud?
To describe its role and define friendly fraud, let us start by saying that this code is absolutely crucial. Namely, this dispute type is raised when a cardholder falls victim to actual, or ‘true’ fraud. This type of fraud is described as typical malicious behavior of a third party, associated with criminal activity – for example - theft of credit card details and illegitimate purchases under the cardholder’s name. Dispute 10.4 enables the cardholder to retrieve such illegitimately debited funds.
However, as necessary as it is, it can be easily misused or abused – often either in an opportunistic way or unknowingly by cardholders themselves. This is what is referred to as ‘friendly fraud’. Common examples are when the cardholder forgets about the purchase that they have made, wanting to take advantage of the chargeback process to get the money back despite the arrival of goods or simply mistakes chargeback for a refund request. These actions can cause a substantial revenue loss for the merchant due to handling dispute costs.
What is Compelling Evidence 3.0?
It is a set of revised transactional data requirements to fight pre- and post-disputes launched in April 2023, brought by Visa - called CE 3.0 in short. This is tailored to prevent cases of friendly fraud on chargeback code 10.4.
How does it work?
For pre-disputes, i.e. to prevent chargeback from being submitted, Visa will automatically select 2-5 transactions that merchants will need to match in real time to support systematic dispute deflection. This provides a pattern of a legitimate transaction history to help prove that the cardholder participated in the transaction and deems the dispute invalid. Such chargeback deflection strategy is available to merchants enrolled to Verifi’s Order Insight.
For post-disputes, that is, when the chargeback was already issued, during the pre-arbitration stage, CE 3.0 offers the merchant the opportunity to find at least two legitimate historical transactions on the same cardholder. Same as for pre-disputes, if such transactions are found and shown as completed within a certain period, they can serve as proof that the cardholder did in fact make a legitimate purchase this time. Such evidence enables the merchants to shift the liability for the transaction to the issuer.
What makes CE 3.0 effective as a chargeback prevention solution together with Order Insight?
Order Insight is a platform, which provides merchants with real-time transaction details enabling them to address disputes proactively and prevent chargebacks from occurring. It also supplies data to acquirers and merchants, giving more context around the disputed transactions and signaling potential issues before the chargeback occurs. Once enrolled on Order Insight and meeting Compelling Evidence 3.0 requirements, the merchant uses a streamlined approach in deflecting friendly fraud attempts.
Who can benefit from it?
Multiple parties can take advantage of the enrollment of the merchant, because of the quality, transparency and sheer amount of transactional data that is being transferred in real time between the issuers and merchants:
· Merchants reduce their fraud and dispute ratios, plus retain more revenue.
· They can achieve that by challenging the dispute in real time by supplying compelling evidence data to the issuer to overturn friendly fraud attempts.
· Issuers are provided with more information on their cardholder’s behavior and many times can provide feedback to the queries the cardholder has, which often is enough not to go ahead with the dispute submission.
· Acquirers get access to accurate data to enhance their compliance program identifications.
How to take advantage of the solution?
· The merchant needs to be enrolled on Order Insight.
· To benefit from CE.3.0 it is important to understand the requirements needed for implementation.
How can you as a merchant follow the requirements for CE 3.0?
· Enroll to Order Insight yourself or via your authorized reseller
· Evaluate your descriptors – make sure they are the same across differentacquirers, for example
· Capture and store 12 months of data
· Make sure your API is perfected to handle real time requests from Verifi
· Gather Acquirer BIN/CAIDs for enrollment
If you are interested in setting up reliable solution to fight chargebacks and fraud for your business, do not hesitate to contact us via the form: https://www.eflowprocessing.com/chargeback-prevention. We are happy to tell you all about the products and solutions we use to deflect chargebacks and fraud to ensure your business is secure and thriving.