Verified by Visa And MasterCard’s: Chargeback Protection

Verified by Visa And MasterCard’s: Chargeback Protection

Durango Merchant Services specializes in fraud prevention for small businesses, especially those that are high risk. Verified by Visa (VbV) and MasterCard’s SecureCode (3DS) is a PIN that cardholders use to verify the legitimacy of online transactions, similar to a PIN that is used with debit cards. This program helps both the customer and the merchant. It protects the consumer by reducing fraudulent transactions, and at the same time protects merchants from many fraud-related chargebacks.

Why use VbV & 3DS?

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.

How Do VbV & 3DS Work?

VbV & 3DS are integrated through our gateway, using either API or Secure Hosted Buy Page integration. There are no “pop-ups,” only a simple additional screen during the checkout process where the customer’s card-issuing bank asks the client to either (a) enroll in VbV or 3DS or (b) to enter in their existing PIN. Since it’s the customer’s card-issuing bank that handles the VbV or 3DS enrollment or PIN entry, this helps provide a level of confidence for the consumer and is beneficial for the 3DS and Verified by Visa merchant. Ask your Durango account manager for screenshots of VbV/3DS in action.

Features and Benefits:

  • Offers merchants state-of-the-art chargeback protection
  • Increased protection from both “fraud” and “friendly fraud” chargebacks
  • Increased customer retention and loyalty (see Visa’s case studies)
  • Higher conversion rates for your customers – turning “browsers” into “buyers.”
  • Free VbV/3DS setup (other providers charge $1,500 to setup a 3DS and Verified by Visa merchant).

Protected Transactions:

  • Guaranteed payment of full authentications (When PIN is entered)
  • Guaranteed payment on attempted authentications (When cardholder is not enrolled)
    – All domestic Visa transactions
    – All international MasterCard transactions
  • Chargeback blocking (liability shift from a verified merchant to issuing bank).
  • Dramatically reduce fraud-screening costs.

Protected Chargeback Reason Codes:

Visa USA:
Credit & Debit Cards – Authentication & Attempts

  • 75: Cardholder does not recognize transactions
  • 83: Fraudulent Mail/Telephone/eCommerce Transaction

MasterCard International:
Credit & Debit Authentication

  • 4837: Cardholder non-authorization
  • 4863: Cardholder not recognized

You can read more about VbV fraud protection directly from Visa at the links below. (Note: The specific reason codes we have listed may change over time, Visa & MC determine the codes protected, not Durango.):

Verified by Visa:

Becoming a 3DS and Verified by Visa merchant is a proven method to help reduce your chargeback liability. Allow Durango Merchant Services to assist in getting your business enrolled in this reliable and beneficial service. Start providing your customers the reliability and professional services they deserve. Contact Durango for a dedicated account manager, additional information, or a free quote!

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