Visa has announced enhancements to its dispute program aimed at helping small businesses combat first-party misuse, also known as friendly fraud, in card-not-present transactions. These changes to Visa's Dispute Rules and Processes will provide small businesses globally with additional resources to tackle fraud, potentially resulting in savings of more than $1 billion over the next five years, according to a press release.
"The impact of first-party fraud can be devastating for small businesses," Visa stated.
One of the key modifications to the dispute process is expanding merchants' options for demonstrating the legitimacy and authorization of disputed charges. This adjustment aims to allow business owners to retain funds that are rightfully theirs while also safeguarding genuine cardholder transactions, as stated in the press release.
Paul Fabara, Chief Risk Officer at Visa, emphasized the importance of the change in fighting all types of fraud on the Visa network. "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," Fabara said.
The revised dispute process is part of Visa's strategy to protect innocent consumers from fraud while supporting small businesses. Visa remains committed to zero-liability for cardholders in the case of unauthorized transactions.
Mitigating first-party fraud is particularly crucial for small businesses, as they often lack the resources of larger organizations. Julie Fergerson, CEO of the Merchant Risk Council, emphasized the collaborative approach needed to combat this threat. "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. We share Visa's commitment to reduce this threat to merchants and believe this rule change signifies historic progress," Fergerson said.
The dispute process, initiated by an issuer in response to a contested transaction, requires a detailed explanation from the cardholder. Various triggers, such as a lack of authorization, missing card imprints, or accepting expired cards, can qualify a situation as a dispute, as detailed in the Dispute Management Guidelines for Visa Merchants document.
Visa's improvements to its dispute program aim to provide small businesses with the tools they need to combat friendly fraud, protecting their revenues and ensuring the integrity of their transactions. With these adjustments, Visa is taking a proactive approach to reducing fraud losses for merchants globally.