In November 2015, when Visa Inc. announced its acquisition of Visa EU, the markets barely seemed to notice the $23.4 billion transaction. Visa shares continued their steady blue-chip climb unfazed. But when the new Visa modified its fraud and chargeback monitoring in 2016, the other shoe dropped, right on top of high-risk merchants.
Europe was a haven for chargebacks much like the Cayman Islands are for taxes. Transactions through Visa EU could carry twice the amount of chargebacks as their American counterparts and still be compliant. European and quite a few cross-border merchants had availed themselves of Visa EU’s more lax regulations. All that changed in 2016 as Visa Inc. merged their European and American fraud monitoring under a single program.
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Visa’s chargeback clampdown came at a bad time for e-commerce, as card-not-present fraud was on the rise. Merchants who were already at high risk for fraud suddenly had even less wiggle room to manage chargebacks. Merchants that had been getting by with 2% chargeback-to-sales ratios, now had to halve that down below 1%. Suddenly, if merchants couldn’t get their chargebacks down below the new Visa Inc. thresholds, in a relatively short period of time, they risked losing their Visa processing altogether.
Needless to say, the Visa rule changes created much gnashing of teeth with many merchants. However, their dilemma was also a wake-up call. If merchants weren’t already taking steps to prevent fraud and manage their chargebacks, they definitely paid more attention thanks to the Visa rule changes.
Not knowing or caring how much fraud you’re processing is bad practice. Finding loopholes in how the issuing banks monitor fraud is also bad practice. Rather than reacting to external regulatory changes, merchants (and especially high risk merchants) should have their own fraud contingencies in place.
Case in point: around the time the new Visa rules were announced, ChargebackHelp got a lot of calls from concerned merchants. For the most part, our clientele was already in good shape going into the rule changes. But among merchants that were well above the new thresholds, we saw a common thread: they weren’t looking out for fraud as well as they could be. ChargebackHelp can prevent up to 40% of chargebacks, but it’s not a cure-all against fraud. Merchants must also have safeguards in place at their points of sale.
For high-risk merchants, having a partner like ChargebackHelp is key to keep their merchant accounts in good standing. However, merchants will get the most from our partnership when they are proactive against processing fraud in the first place. When your ability to process transactions hangs in the balance, you should take all the necessary steps to prevent fraud. Don’t wait until the banks notify you about your fraud problem, because it may be too late.
At ChargebackHelp, we are committed to safeguarding our clients’ merchant accounts. Stay tuned here for resources on how work in tandem with our services to defend against fraud. You can also subscribe to our monthly newsletter for news and resources to help you optimize your stance against fraud and chargebacks.