Upcoming Chargeback Operational Impacts. Overview of 2018 Scheduled Association Disputes Processing Changes

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1 Upcoming Chargeback Operational Impacts Overview of

2 EVO at a Glance 16 offices across 10 countries Over 2,000 team members worldwide More than 450,000 merchant accounts Processing over $100 billion in volume 130+ transaction currencies 2

3 A Global Presence Atlanta, GA - World Headquarters New York, NY - USA Headquarters Portland, ME Denver, CO Omaha, NE Dallas, TX Cincinnati, OH Tampa, FL Canada Mexico Ireland United Kingdom Malta Spain Germany Poland Czech Republic 3

4 Overview 2018 Visa Dispute Processing Changes (VCR) 2018 MasterCard Dispute Processing Changes (Claims Manager) Summary of Changes and Impact to Risk Management 4

5 2018 Visa Dispute Processing Changes

6 Visa Claims Resolution (VCR) Implementation Timeline October 2017 New Zealand and Hong Kong April 2018 All remaining countries (including US, Australia, Canada and Europe) 6

7 Visa Claims Resolution Primary Objectives Additional Internal Controls and Data Points at Visa To eliminate invalid chargebacks/disputes from entering the Visa System from the issuer, Visa is going to introduce edits at the front end of the dispute process. For example, if an issuer is attempting to submit a card not present fraud case, and the transaction data shows that the card was swiped or chip enabled, Visa will not allow the dispute to continue. By introducing edits at the front end of the dispute process, it is anticipated that there will be reduction in the number of disputes flowing through Visa. Reason Code Consolidation and Renaming Visa will consolidate the current 22 different chargeback reason codes into four dispute categories: Fraud, Authorization, Processing Errors, and Consumer Disputes. Disputes Divided into 2 Separate Categories and Workflows (including timeline changes) Allocation Disputes (Fraud and Authorizations) New Terminology and Types of Disputes Collaboration Disputes (Processing Errors and Consumer Disputes) Old Term: Chargeback Old Term: Representment New Term: Dispute New Term: Dispute Response 7

8 Allocation Dispute Reason Codes Legacy Chargeback Reason Codes Qualified for Allocation Disputes Fraud 62 (Counterfeit Transaction) 81 (Fraud Card Present 83 (Fraud Card Absent) 93 (Merchant Fraud Performance) New VCR Allocation Dispute Categories 10. Fraud 10.1 EMV Liability Shift Counterfeit Fraud 10.2 EMV Liability Shift Non-Counterfeit Fraud 10.3 Other Fraud-Card Present Environment 10.4 Other Fraud-Card Absent Environment 10.5 Visa Fraud Monitoring Authorization 70 (Card Recovery Bulletin or Exception File) 71 (Decline Authorization) 72 (No Authorization) 73 (Expired Card) 78 (Service Code Violation) 11. Authorization 11.1 Card Recovery Bulletin 11.2 Declined Authorization 11.3 No Authorization $$ Important Liability Shift Notice: Once Visa has processed an Allocation Dispute against an Acquirer, liability for the dispute will remain at the Acquirer unless the Issuer accepts liability via the Pre-Arb Phase or Visa rules in the Acquirer s favor during the Arbitration Phase. 8

9 Allocation Dispute Life Cycle and Timeline Legacy Life Cycle of a Chargeback/Dispute Chargeback 120 to 180 Days (timeframe extensions apply) Representment 45 Days from CB processing date from Issuer Issuer Initiated Pre-Arbitration Request - 30 Days from Representment processing date Acquirer Pre-Arbitration Response 30 Days from Pre-Arbitration Processing Date Issuer Initiated Arbitration 30 Calendar Days from Pre-Arbitration Response Processing Date New Life Cycle of a VCR Allocation Dispute Allocation Dispute 120 to 180 Days (timeframe extensions apply) Acquirer Initiated Pre-Arbitration 30 Days from CB processing date from Issuer Issuer Pre-Arbitration Response 30 Days from Pre-Arbitration Processing Date Acquirer Initiated Arbitration 10 Calendar Days from Pre-Arbitration Response Processing Date 9

10 CollaborationDispute Reason Codes Legacy Chargeback Reason Codes Qualified for Collaboration Disputes Processing Errors 74 (Late Presentment) 76 (Incorrect Currency or Transaction Code) 77 (Non-Matching Account Number) 80 (Incorrect Transaction Amount or Number) 82 (Duplicate Processing) 86 (Paid by Other Means) Consumer Disputes 30 (Services Not Provided) 41 (Cancelled Recurring Transaction) 53 (Not As Described or Defective Merchandise) 85 (Credit Not Processed) 90 (Non-Receipt of Cash or Load Transaction Value) New VCR Collaboration Dispute Categories 12. Processing Errors 12.1 Late Presentment 12.2 Incorrect Transaction Code 12.3 Incorrect Currency 12.4 Incorrect Account Number 12.5 Incorrect Amount 12.6 Duplicate Processing/Paid by Other Means 12.7 Invalid Data 13. Consumer Disputes 13.1 Merchandise/ Services Not Received 13.2 Cancelled Recurring 13.3 Not as Described or Defective Merchandise/ Services 13.4 Counterfeit Merchandise Misrepresentation 13.6 Credit Not Processed 13.7 Cancelled Merchandise/Services 13.8 Original Credit Transaction Not Accepted 13.9 Non-Receipt of Cash or Load Transaction Value 10

11 Collaboration Dispute Reason Codes Legacy Life Cycle of a Chargeback/Dispute Chargeback 120 to 180 Days (timeframe extensions apply) Representment 45 Days from CB processing date from Issuer Issuer Initiated Pre-Arbitration Request - 30 Days from Representment processing date Acquirer Pre-Arbitration Response 30 Days from Pre-Arbitration Processing Date Issuer Initiated Arbitration 30 Calendar Days from Pre-Arbitration Response Processing Date New Life Cycle of a VCR Collaboration Dispute Collaboration Dispute 120 to 180 Days (timeframe extensions apply) Acquirer Initiated Dispute Response 30 Days from Dispute processing date from Issuer Issuer Initiated Pre-Arbitration Request - 30 Days from Dispute Response processing date Acquirer Pre-Arbitration Response 30 Days from Pre-Arbitration Processing Date Issuer Initiated Arbitration 10 Calendar Days from Pre-Arbitration Response Processing Date 11

12 2018 MasterCard Dispute Processing Changes

13 Mastercard Claims Manager Brief Summary Implementation Timeline: Late (contact your Processor/Sponsor Bank for additional details) Chargeback Timeframe Reductions: 120 Days to 90 Days Dispute Phase Reduction: Elimination of Arbitration Chargeback Phase (in line with Visa Collaboration Disputes) Additional Automation and Edits at MasterCard: Invalid Chargeback blocking and MasterCard will perform refund/credit checks Addition of Pre-Chargeback Cycle: Possible Inclusion of Merchant in the Dispute Cycle to resolve dispute before a CB is processed More Robust MasterCom Chargebacks Interface for Processors: Legacy MasterCom primarily utilized for Image Tracking. New MasterCom will assist with end to end tracking of a Dispute for its entire LifeCycle. Additional Details to be released by Mastercard later

14 Summary of Changes and Impact to Risk Management

15 Risk Impacts/Summary Visa Claims Resolution (VCR) Reduced overall dispute cycle timeframes once a Dispute starts from 150 Days to 100 Days 45 Day Response Time to Represent (Dispute Response) Reduced to 30 Days Allocation Disputes will immediately shift liability to the Acquirer and it will be up to the Acquirer to pursue a Pre-Arb and provide Compelling Evidence Clarification: Older VCR Documents advised that Collaboration Disputes were not a financial/settlement event. This is no longer true as of the May 2016 VCR Updates and a Collaboration Dispute does indeed involve a financial liability shift from the Issuer to the Acquirer Increased Pre-Processing Edits at Visa should reduce overall Incoming Chargeback/Dispute counts at Acquirers Mastercard Claims Manager Reduced overall dispute cycle timelines due to initial processing timeframe reductions and elimination of the Arbitration Chargeback Phase Elimination of the Arbitration Chargeback Phase may see an increase of incoming Pre-Arbitrations from Issuing Banks Increased Pre-Processing Edits at MC and the addition of the Pre-Chargeback Cycle should reduce overall Incoming Chargeback/Dispute counts at Acquirers 15

16 Questions? Domenic Cirone Vice President, Chargebacks Processing evopayments.us