Visa Compelling Evidence CE3.0: your new ally against first party fraud

The truth is that no matter how you slice it, when it comes to types of first party fraud schemes, there are always challenges to meet and some costs to bear. Although dozens of chargeback fraud prevention solutions are on the market, most tackle the issue too late. When the card network already processes the dispute, the damage is done, and you need to fight back, which takes time and money. Of course, you can immediately prevent a dispute to move on in the process, but that’s when the cardholder request is legitimate for a refund. 

But now, with Visa Compelling Evidence 3.0 (Visa CE3.0) new guidelines, you can deflect disputes, meaning that if you send specific transaction details, the liability is immediately shifted from you. It’s not a pipe dream, it’s the solution you’ve been waiting for, and to take advantage of it, you need to enroll in Verifi Order Insight service to provide the required information that ‘proves your innocence’.  

We’ll walk you through the process and show you exactly how to be part of this new initiative. Be ready to learn:

• Why first party fraud is here to stay
• How Visa CE3.0 can make it walk away
• Order Insight’s role in the matter
• What steps you need to take to benefit from Visa CE3.0 rules

Fighting first party fraud is a cumbersome process, and winning the fight drains you enough along the way so that, in the end, to not feel like a winner but just relieved that it’s over, regardless of the costs. 

While first party fraud is not an issue that can vanish, it can now be better approached. But first, let’s see what core challenges Visa CE3.0 can address.

The outcomes after order fulfillment are unpredictable

You never know what’s next. Unless you have a very close relationship with your consumers, which is unlikely when you have hundreds or thousands of orders daily, what happens after you fulfill the order is unpredictable. In the coming days or weeks, you may expect a review, a return request, or you may learn about a chargeback notification. Although you know that the payment and delivery processing was smooth sailing. 

Consumers misuse their rights

Consumers either misuse their rights or simply commit fraud. Here, we have two situations. The first party fraud occurs when the consumer knows what they’re doing is wrong. They file a dispute to the issuing bank, although the reason is not legit. They are confident in doing so because they trust the bank would act in their favor. 

There is also the second situation when the consumers don’t recognize a transaction on their bank statement. They may see a different billing name, let’s say 'TechHub Inc.,' on their bank statement, even though they made the purchase from 'CoolGeek Store’. Due to unclear merchant descriptors, they jump straight to filing a dispute with the bank. While you might expect recurrent customers to be familiar with this difference in naming, it's not always the case.

It’s very important to note that these are the only scenarios that can be tackled with Visa CE3.0. Chargeback fraud that involves an unauthorized transaction made by a fraudster on behalf of a cardholder whose card details were stolen is a different story. 

Fees can affect your cash flow

You are often still held responsible for paying several transaction dispute fees imposed by the acquirer or payment processor, ranging from EUR 15 to EUR 100. Also, when a dispute is initiated, the transaction amount is typically held from your account and is released only after the dispute is resolved. Until then, your cash flow may be affected. 

As you might have experienced by now, everything starts with a dispute. Visa CE3.0, which kicked into gear in April 2023, is a fresh take on improving how disputes are resolved. Recent updates from both card networks earlier this year emphasize the growing importance of enhancing chargeback protection.

This particular update takes center stage when discussing disputes related to first party fraud. Visa CE3.0 is designed to help you, the merchant, share order information to leverage the CE3.0 rule for 10.4 Visa CNP disputes.

This improved protocol allows you to present evidence, such as records of previous transactions, to counter false fraud claims. Think of a way of making it easier for you to take on those payment disputes that shouldn't have shown up in the first place. Yet keep in mind that this is available only for recurrent transactions, but we’ll get there soon with more details. 

Under CE3.0, you will have a standardized framework to share information and make rock-solid cases during a dispute. If you can provide compelling evidence fulfilling the new requirements, the liability for the dispute will be transferred to the issuer. 

What you need to qualify for Visa CE3.0

To qualify for Visa CE3.0, you need to provide data that helps track your past purchases. So, you are eligible only for recurrent transactions, including but not limited to subscription-based transactions. You need to share info for two to five previous transactions that meet the following criteria:

• Transactions should be between 120 and 365 days old
• Eligible transactions must have no active fraud report or ongoing fraud dispute
• At least two core data elements - user ID, IP address, shipping address, device ID, or fingerprint - must match between prior transactions and the disputed one
• At least one of the above elements must include either the IP address, device ID, or device fingerprint
• Transactions must come from the same merchant and card

The benefits

If a dispute is raised and you know it’s not your fault, you can whip out the evidence and stop it before any real damage is done. That’s the ultimate goal, but you can benefit from more. 

• Dispute ratio is not affected
  The dispute ratio represents the number of transactions consumers have disputed relative to the total transactions. If a disputed transaction is deflected it won't count towards this ratio. 
• You reduce the operational costs
  Again, if the dispute is deflected, it’s like it never happened. You can also reduce the financial resources you usually spend handling and resolving payment disputes. 
• Eliminate billing confusion
  As we mentioned before, the consumer doesn’t recognize the transaction from their bank statement, and sometimes, you can’t blame them for this. But you can now show them that the brand and registered company names come from the same entity.

Order Insight is a vital link in the dispute resolution process by establishing a real-time data exchange between you and the issuers via APIs. 

When cardholders question their transactions, they contact their issuer that in turn uses Order Insight to request transaction details from Visa. This request is then relayed to Verifi, who communicates with the merchant to retrieve the necessary purchase details. Once collected, this information is shared with the issuer via Visa. The issuer reviews these details with the cardholder to determine if a dispute is necessary, helping streamline the resolution process.

Source: verifi.com

Why acting pre-dispute is crucial

In the past, merchants could only deal with disputes after they had already become a problem. This process involved working with your payment processors to respond to these issues. Thanks to new compelling evidence rules, you can share more information about past transactions. In the pre-dispute stage, this information is exchanged, and the rules are applied before the dispute is fully submitted and processed by Visa. Moreover, when a dispute is prevented using these CE3.0 rules, it doesn't count against your dispute ratio. This distinction sets apart pre-dispute from post-dispute actions. 

What happens in the post-dispute stage?

Considering the new rules, the acquirer should send a special form called a VROL pre-arbitration questionnaire to respond to a dispute. This form must have all the correct information, like Device ID and IP Address, filled in correctly. Acquirers can only try to send this form once, so it must be fully accurate before sending, otherwise it won’t be valid. 

The VROL system checks if the info in the form is correct. If it is, the form goes to the issuer for review. The acquirer will only qualify for the compelling evidence solution if the info is correct. In Visa's early dispute process, banks must still agree to this form or let it expire. It usually takes 30 days. Banks can say no to this form and choose to go to arbitration if they have proof that the acquirer doesn't qualify for CE3.0. Just like today, merchants and acquirers can also go to arbitration, but there might be fees for this.

Order Insight vs. Visa Rapid Dispute Resolution

It seems like Order Insights and Visa CE3.0 can solve the dispute issues in their tracks, so for those of you who’ve been using Visa RDR, perhaps you are wondering whether this latter service is still relevant or somehow integrated into the whole process. RDR plays its own role, and it has a different scope. 

RDR enables you to refund a transaction before the dispute process starts. This way, you avoid a long process and the fees that come with it. Yet this scenario is possible when the cardholder is genuinely entitled to a refund. But when the cardholder doesn’t actually deserve a refund, Order Insight and Visa CE3.0 come into play so you can prove that you are not at fault. 

You have four parties in the mix - the cardholder, the issuer, the chargeback management solution (Verifi), and the card network (Visa) - and now you are wondering why you would need a solution provider to the equation. 

If you engage with Order Insight through our services, you can benefit from a simplified journey that ultimately enables you to deflect disputes, eliminate billing confusion, simplify operations, and help with first party fraud detection. All you have to do is send your transaction details, and we take it from there. 

You can also benefit from our fraud prevention product with all its features to help you further reduce fraud.

A multi-step process made simple

As evidence requirements, Verifi asks us to retrieve the order information when a cardholder contacts their issuer.  We provide the matched information, which Verifi then shares with the issuer. If Visa CE3.0 are met, the liability for the dispute is shifted away from you, essentially making it as if the dispute never occurred.

Increase your chance for successful dispute deflection

Our profiling solution, which collects extensive user-related data within seconds, captures all the essential data attributes according to Visa CE3.0 rules, including challenging-to-get fields such as Device ID and device fingerprint. This way, you increase your chances of deflecting a dispute. 

As a certified partner of Verifi, we can guide you through the entire documentation concerning Visa Compelling Evidence 3.0 and address any pressing questions you may have before taking any decision. 

Contact us to learn how we can support you in meeting Visa CE3.0 criteria and deflect disputes.