How to Manage Chargebacks with Minimum Risks

Illustration by Alex via Dribbble
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Through the customer’s eye, chargeback is the greatest invention since the wheel. If suddenly you fell victim to some fraud, you can claim chargeback, and chances are thе transaction made on your behalf is reversed. It’s not all rainbows and unicorns for the seller, though, because chargeback can be used for fraud just as well as against it.

How can you secure yourself as a merchant? Provide the bank all the information about the transaction, so you can prove it was the customer’s mistake or malevolency (if that’s the case). VMPI by Maxpay is the system run by VISA that can prevent a serious percentage of chargebacks and save your money.

Chargeback? Meme

VMPI! (You Can Get Yourself Clean)

Okay, you sell goods or provide services. You have received a payment from someone who wants to buy, say, a T-shirt. After the item has been delivered, the bank charges you back because the buyer (the owner of the card or the electronic wallet) claims the purchase was not legit.

Maybe the item was not delivered? Or the merchant sent them the wrong package? Or it was not the card owner at all who made the purchase? Or was it all so-called friendly fraud, when a customer pretends not to receive what they have paid for?

To minimize these risks, there are special developments like VMPI – Visa Merchant Purchase Inquiry. If the bank attempts to reverse the transaction due to a chargeback claim, the merchant can reply with proof that the purchase was initially legit, attaching the necessary data collected automatically. This double shield makes it safer for both sides.

The idea of VMPI is to provide yourself with more information about the transaction and to forward it to the issuer in case of dispute. It may be the location, the device ID (which may indicate the card or its data might have been stolen), the exact date and time of the purchase, and so on, as well as shipping data (including a tracking number and delivery address).

These pieces of data may be used to find out the truth about the purchase and prevent friendly fraud – attempts to cancel successful purchases and keep both the purchase and the money.

Along with third-party systems, VMPI can provide even higher levels of safety, including prevention of potentially dangerous transactions by, say, completely banning potential fraudsters from purchases.

These extra measures, though, are not always necessary. Purely informational services are sufficient in enough cases for the entire business to make sense.

VISA-VIS

How does the VMPI work? Imagine the scenario from the beginning.

  1. The cardholder contacts their bank, claiming chargeback on some of the unidentified transactions and requiring the return.
  2. The bank contacts the merchant subject to recharging and checks whether they participate in the VMPI program. If so, VISA alerts the merchant with a message and requires all available information on this particular payment. Collecting it requires no extra moves as it happens in the background.
  3. The provided data is shared to the card issuer in order to find out what actually happened.
  4. The card issuer comes to a decision whether to apply chargeback

These pieces of data are supposed to indicate whether the chargeback is justified (if the card has been stolen or the merchant has not shipped the right items) or it’s possibly fraudulent.

When suspicious claims are recognized and declined, the overall chargeback amount decreases. Given how much the chargeback system affects the merchant’s income all over the world, it’s important for any seller, major or minor.

In addition, it partly solves the problem of delayed chargebacks. These can occur within months or years after the initial transaction when you hardly might expect anything at all. The reason for it is the procedure the bank launches on receiving a claim.

How to Join the VMPI

Okay, if you don’t want to be targeted by fraudulent chargeback claims, you can join the VMPI program. Any merchant or bank can participate and benefit from it. The procedure does not require a lot of formalities. It can integrate with merchant bank accounts and PoS’s, collecting the data in real time.

Yet setting it up is quite a job. While the process itself is automated and takes just seconds, keeping the system up requires attention. That’s why there are many third-party services that provide both VMPI integration and maintenance of the system.

If you don’t want to spend your time and resources on this, it’s a good idea to connect to one of these third-party providers. They must be authorized by VISA to provide their service; usually, though, it’s no problem. Neither is it too expensive. Merchants are charged per alert. Given that the average sum claimed is well above that threshold, joining VMPI still pays.

How Much Does VMPI Cost?

With VMPI, the merchant is charged per alert. The price of a single alert depends on the overall volume of alerts, starting at $10 but decreasing down to $8 as the number grows. That’s the standard pricing by VISA.

Given that much larger amounts are usually disputed, paying $10 to avoid even a $15 chargeback is quite a deal. If the price of the deal in dispute is in hundreds or thousands, it makes even more sense. Even though some disputes are not resolved in the merchant’s favor, others are.

All in all, VMPI prevents way more chargebacks than you have to pay for alerts. Frankly speaking, otherwise very few would have used it. In addition, it provides you with merchant account summary reports that you can analyze and make conclusions.

Spread the Word that Saves

If you are starting your online business that implies accepting payments online, chargebacks are the reality to prepare for.

Time comes for taking measures to protect yourself. So, you better learn how to prevent friendly fraud and other costly situations.

You can ask questions or share your experience down here in the comments or bring it to your Facebook or Twitter to get your friends involved too.

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