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

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1 Upcoming Chargeback Operational Impacts Overview of Past and Scheduled Association Disputes Processing Changes

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

5 2018 VCR Impacts and Upcoming Changes

6 Visa Claims Resolution (VCR) Implementation April 15, 2018 VCR Implementation Worldwide (Hong Kong and New Zealand, October 2017) September 30, 2018 Visa VCR Accept and Response Fee Implementation 6

7 Visa Claims Resolution Impacts since 4/15/2018 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 Impacts 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 Life Cycle and Timeline Impacts 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 VCR Accept Fees Timeframe Implementation 9/30/2018 Implementation Timeline: September 30, 2018 Acquirer/Merchant Accept Liability Timeframe: 21 days after receipt of Dispute Fee Amount: TBD by Visa, Acquirer/Processor 12

13 2018/2019 MasterCard Dispute Processing Changes

14 MasterCard Claims Manager Brief Summary Implementation Timeline: Claims Manager open to all parties: June Target migration completion date: June 2019 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. Timeline: TBD 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. 14

15 MasterCard Upcoming Chargeback Rules Changes Effective October 2018: RC 4837 (No Cardholder Authorization) : Removes condition which allowed an Acquirer to provide new information of a merchant name/location/dates as a remedy when there is a complete mismatch between authorization and clearing. RC 4863 (Does Not Recognize): Requires cardholder letter or as supporting documentation in first chargebacks. Documentation must be a direct result of cardholder communication. Expedited Dispute Resolution forms or phone call documentation will not be allowed. To be eliminated between June and October RC 4834 (Point of Interaction Error): Moves Late Presentment chargeback rights and language to RC Compliance Filings: Requires Pre-Compliance to be filed prior to escalation as Compliance case for all applicable Compliance case filing reasons. Reduce Pre-Compliance and Compliance Case filing timeframes from 180 days to 120 from the central site processing date/violation date or 45 days form the chargeback reject date / fee collection date 15

16 MasterCard Upcoming Chargeback Rules Changes Effective April 2019: Arbitration Chargeback Cycle Elimination: Arbitration chargeback cycle will be removed. As a result, documentation requirements will be moved to the first chargeback cycle. RC 4840 (Fraudulent Processing of Transactions): Will be eliminated and no longer valid. RC 4834 (Point of Interaction Error): Reduces first chargeback timeframes from 120 days to 90 days. Pre-Arbitration Filings: Requires Pre-Arb Case filings for Fraud (excluding chip 4870 / 4871 chip /PIN liability shift chargebacks), Cardholder Disputes and Point of Interaction Error reason codes prior to escalating as an Arbitration case. 16

17 Summary of Changes and Impact to Risk Management

18 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 Effective October 1, 2018: VCR Non-Accept Fees are implemented. 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 18

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