Whether you are taking mobile payments or accepting payments online, every business must be prepared for chargebacks. If a customer disputes a charge with their bank (or issues a chargeback), they are reimbursed the money immediately. It is then left up to the business to fight to get its money back by proving the transaction was valid. Although it is impossible to stop customers from issuing a chargeback, there are tools available that can help limit the number of chargebacks you receive.
Rapid Dispute Resolution is a payment dispute tool from Visa. RDR is the new evolution of the Cardholder Dispute Resolution Network. This fully automated dispute management solution is familiar to many merchants. Like CDRN, it is a valuable tool to help respond to payment disputes before they become chargebacks. RDR prevents a chargeback at the pre-dispute stage; therefore, such disputes are not included in the chargeback rate. It allows businesses to automatically accept and provide funds back to the cardholder, thereby preventing a chargeback.
In addition to the lost revenue, a chargeback brings fees, reputational damage and an elevated chargeback ratio, which could have dire consequences down the road.
RDR can also be a valuable tool for increasing customer satisfaction. As a practice, you should be blocking customers that you believe are engaging in friendly fraud. However, those customers often do have legitimate issues and simply don’t know how, or chose the wrong way, to try to solve them. Receiving an immediate refund instead of waiting days or weeks will improve their opinion of your service and could lead to returning clients, future purchases and a better word-of-mouth reputation.
Verifi, a subsidiary of Visa, has estimated that almost $31 billion is lost each year to disputes. Much of this loss may be reduced through proactive management of a new dispute category Visa is introducing, called “pre-disputes.” As explained by Visa, pre-disputes exist in the period before a simple cardholder inquiry escalates to a chargeback. When an issuing bank is set to process a chargeback, RDR prompts the acquiring bank to issue a credit to the customer rather than processing it as a chargeback. RDR handles these transactions as an automated system without the merchant’s direct involvement, protecting the merchant from unnecessary chargebacks that sometimes slip through the cracks.
With RDR, the cardholder will see the return authorization immediately on their online statement the same way that they see a sales transaction. This will reduce customer service inquiries to merchants from cardholders looking for their refund and reduce the number of chargebacks a merchant will receive. Customers can follow the return authorization, from a pending transaction to the time that the funds are deposited into their account, nearly in real time. This applies to both credit and debit/check cards but is only available with Visa currently. Adding RDR will be an instant benefit to merchants as the number of chargebacks should be reduced immediately.
RDR will not only be cost-effective and time-efficient, but it will also be simple to implement. As stated in an October 2020 Visa Business News article: “Visa will activate merchants in Canada, CEMEA, Europe and U.S. regions in the RDR service through VROL effective with the April 2021 VROL release. Visa will automatically activate the RDR service for all issuers/issuer processors with a VROL organization, which will initiate an RDR request for any transaction with a participating seller prior to that transaction being sent for formal dispute processing. If the seller accepts the liability, the dispute process will be avoided. Issuers and issuer processors may opt-out of the RDR service through an updated VROL enrollment request. There are no required VROL system changes, but issuers should review their internal processes to determine if any impact to processing exists. An RDR transaction will flow down the existing dispute process and will be flagged accordingly if the issuer wishes to identify and report on RDR-resolved disputes.”
Business owners know that returned payments are an inevitable part of doing business. Whether due to fraud, customer dissatisfaction or any number of other issues, every business will face circumstances in which they must return payments to customers. Of the multiple methods by which such a return could occur, a chargeback is by far the most damaging to a merchant. In addition to the lost revenue, a chargeback brings fees, reputational damage and an elevated chargeback ratio, which could have dire consequences down the road.
RDR is ideal for businesses that see multiple identical disputes that are routinely refunded. These businesses include digital subscription merchants, merchants with low-dollar products, or high-risk merchants that serve demographics with high fraud rates. It is also ideal for companies with low dispute totals that want the few disputes they get to be handled.
RDR saves businesses from unnecessary and undesirable consequences by preventing chargebacks and processing return payments by other means. A transaction returned through RDR does not carry chargeback fees, does not increase a merchant’s chargeback ratio and does not use significant operational resources due to its automated working process. In short, RDR frees up business owners to devote their time and energy to the other efforts that make their businesses function and be successful.
Jonathan Corona has 15 years of experience in the electronic payments industry. As MobiusPay’s COO, Corona is primarily responsible for day-today operations as well as reviewing and advising merchants on a multitude of compliance standards set forth by the card associations. MobiusPay specializes in merchant accounts in the U.S., EU and Asia. Follow them @MobiusPay on Twitter, Facebook and IG.
