The main problem that merchants face when accepting credit card payments online is protecting themselves from fraudulent chargebacks, whether truly fraudulent or “friendly fraud.” True fraud is when a customer’s card data has been stolen, and the purchase is not legitimate. Friendly fraud is when a customer fully knows that they purchased the service/product, but is trying to take advantage of the chargeback rules, which favor the customer over the merchant in a card-not-present (CNP) environment. This is especially a problem with merchants selling digital products online, such as software downloads and eBooks, as well as traditional products or services sold in a CNP environment. Merchants that have disputed chargebacks in the past know that the “burden of proof” lies with the merchant to prove that a transaction is valid, and if unable to do so, that the burden of repaying the chargeback lies with the merchant as well.

Two of the most common chargeback codes a merchant will see are fraud codes, mainly “Fraudulent Transaction” or “Cardholder Does Not Recognize.” To issue a chargeback for these reasons, a customer simply calls their card-issuing bank and claims they did not make the purchase (or worse, these days a customer can initiate a chargeback online with only a few mouse clicks), and it is then up to the merchant to prove that the transaction was not fraudulent (and if you only have an IP address to verify the customer, that won’t get you very far). The problem is, even a customer who knowingly purchased a service can still process a chargeback using the same reasoning (“I didn’t make this purchase”) in a “card not present” environment, and, in many cases, the merchant may lose these chargebacks without additional documentation to verify the sale (i.e. a signed order form or signature delivery, which isn’t practical for many online transactions).

By using these specific services, 3DS and Verified by Visa merchant will have the ability to “block” many fraud-type chargebacks. By simply providing your customer the option to use VbV & 3DS, you will protect up to 65-75% of your transactions from fraud-coded chargebacks: Visa will block the customer’s ability to initiate a chargeback, whether or not the customer (a) enrolls in VbV or (b) uses their VbV PIN password. So long as you offer the customer the opportunity to enroll in or use VbV, your transaction is protected for the chargeback codes listed below. MasterCard will protect the transaction against fraud chargebacks codes listed below only if the customer enrolls and/or uses 3DS.