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How Visa Fights Friendly Fraud in 2024

Last year, Mastercard cited that 75% of fraud experienced by digital businesses can be directly linked to first-party fraud

It’s no wonder that friendly fraud is one of the most talked about subjects at conferences we’ve attended this year (ASW2024, MRC Vegas, and Transact). That’s because Visa has been actively updating and implementing parameters to catch fraudulent disputes before they become chargebacks. And Mastercard is nipping at their heels, gearing up to release their own new set of protocols for 1st party fraud in October.

Let’s dig into the big changes that Visa has made in 2024…

First, Why Is Visa Focused on Fighting Fraud?

Everyone profits when the Payments Ecosystem is healthy—especially the Card Brands.

MRC has connected that fraud rates have a direct correlation to decreased authorization bank rates. Because of this, you’ll see banks tighten their fraud filters and decline more merchant accounts that are deemed ‘high-risk.’ This can result in Merchants losing potential revenue from legitimate purchases and increased customer acquisition costs. 

For Visa, implementing and refining an answer for ‘what is fraud,’ and providing the procedures to prove the validity of a transaction, can help decrease the overall number of disputes that become chargebacks. That means less time and resources spent on overseeing a chargeback or arbitration case. It also means that Merchants are spending less on fees and staying healthier for longer.

How Visa Fights Friendly Fraud in 2024

Visa fights friendly fraud with a handful of services, tools, and protocols that run behind the scenes. These services verify that each-and-every Visa transaction follows defined parameters. When assessing friendly fraud, they’re using the following: 

  • Compelling Evidence 3.0 (CE3.0) — Think of CE3.0 as a set of guidelines that define if a dispute is fraudulent. Specifically, it’s a protocol for checking if a Dispute Code 10.4 is valid. If invalid, then the dispute is canceled; if valid, that dispute becomes a chargeback. The 2024 CE3.0 updates include:
    • Transaction must be at least 120 days old, and no older than 360 days
    • Transaction has no active fraud report
    • Transaction doesn’t have an active fraud dispute
    • At least two data elements match prior transaction and disputed transaction
    • One of two data elements is IP address or device-ID/fingerprint
    • Transactions must be from the same Merchant

  • EMV 3DS — When making purchases online or with a digital wallet, you may have to enter a CVV code, unlock your wallet with a face scan, type in a one-time password, or use other secure methods. This helps the Merchant prove that the card holder intended to make the purchase. It also looks at device IP, location, and transaction history to validate the cardholder. The big EMV 3DS updates for 2024 mean:
    • Merchants need to use it for:
      • All transactions over $1,000
      • High-risk transactions (CNP, gambling, furniture, and more)
      • Transactions from high-risk countries

    • Transactions exempt include:
      • Recurring payments
      • Whitelisted Merchants
      • Low-risk payments

  • Visa Advanced Authorization (VAA) — This is Visa’s real-time fraud monitoring system. It analyzes transaction data and cardholder behavior to help detect potential friendly fraud
  • Visa Token Source (VTS) — Tokens hide card information behind a unique identifier. That unique token is randomly generated every time a payment is made. It just means that in case of an account take over or data breech, the fraudulent actor will have a harder time reusing the stolen card

What’s ‘Dispute Condition 10.4?’
Dispute Condition 10.4 is a Visa chargeback reason code for ‘Fraud’ or ‘Other Fraud: Card-Absent Environment.’ It indicates a fraudulent transaction that the cardholder doesn’t think they should pay.  This reason code can be difficult to work with, especially in a Card-Not-Present environment, since it’s difficult to prove what’s accidental or intentional.

What’s the Punchline?  Why is all this Important for Merchants?

  • Fewer Chargebacks and Fraud – As Visa standardizes ‘what is fraud,’ protecting against fraud can become easier. It takes the guess work out of what defines a valid transaction
  • Lower Chargeback and Fraud Rates – Prescriptive rules around what’s valid can mean less chargebacks and fraud. For the case of CE3.0, assuming all the criteria is met, Merchants can block disputes before they become fraud or a chargeback

What if Making Sense of Payments Was Easy?

Every Card Brand has its own set of guidelines, procedures, and tools for managing first-party fraud. Visa might make it possible to better filter out fraudulent actors, but navigating the ever-changing landscape as a Merchant can feel impossibly limiting. 

What if I told you that Slyce360 simplifies payments? Slyce360 alerts Merchants to rising payment issues and provides comprehensive gameplans for how to attack the growing problems. Best of all, changing thresholds and Brand rules are baked into the tool!

Talk to your Payment Service Provider today about the power of Slyce360. 

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