Visa’s Rapid Dispute Resolution (Visa RDR) service is a key step in assisting merchants in managing and monitoring chargebacks more effectively. By automating the dispute resolution process, Rapid Dispute Resolution helps merchants handle their chargebacks and enhances the cardholder experience, especially if your business’ chargeback process is lengthy.
Research shows that 90% of merchants identified 'cardholder abuse of the chargeback process' as a major concern for their business. Further to this, in 2023, 52% of merchants reported that the level of refund abuse increased. On average, retailers felt that the level of refund abuse had remained mostly constant in the last three years.
Therefore, it becomes a core part of your payment strategy to manage, monitor and optimise chargebacks for a seamless payment experience. Our article delves into what Visa RDR is, how it can be used to manage chargebacks and its benefits, among other things.
What is Visa Rapid Dispute Resolution?
Visa RDR is a product upgrade of Visa’s original Chargeback Dispute Resolution Network. This new service was introduced in April 2021, in partnership with Verifi, to automate dispute resolutions in the pre-dispute stage of a chargeback. It was then made a mandatory service for issuers to offer by Visa in October 2021.
How can a merchant use Visa Rapid Dispute Resolution?
Visa Rapid Dispute Resolution helps protect merchants and cardholders by optimising how refunds and chargebacks are handled. We explain in detail the difference between a refund and chargeback here, but in short, a chargeback is when a cardholder requests the amount paid for a purchase back from their issuing bank, claiming that it is either related to fraud, for services not rendered or when the product is not as described.
When a merchant is enrolled in Visa Rapid Dispute Resolution (RDR) transactions, they can establish a set of rules within the service governing when to accept a refund and when further action, such as a chargeback, is necessary. Your payment service provider (PSP) can assist in crafting these rules to safeguard your revenue against the impact of disputes. Here's how Visa RDR streamlines the process:
- Merchant rule setting: Merchants define rules within the RDR service specifying conditions for refund acceptance versus escalation to a chargeback.
- Dispute matching: Disputes matching these predefined rules prompt Visa RDR to engage with the issuer or acquiring bank.
- Chargeback initiation: When a cardholder's issuer receives a dispute request, it initiates a standard chargeback process.
- RDR enrolment check: Visa checks if the merchant's MID or descriptor associated with the disputed transaction is enrolled in RDR.
- RDR transformation: If enrolled, Visa transforms the chargeback message into an RDR. After this, Visa directly debits the acquirer's settlement account and credits the issuer's account under the RDR message, closing the case seamlessly.
This streamlined approach not only prevents disputes from escalating into chargebacks but also simplifies fund movement, eliminating the need for a separate refund operation. Visa RDR ensures efficient dispute resolution while minimising revenue loss for merchants.
How does the Visa Rapid Dispute Resolution service work?
Visa RDR service is a service made to avoid chargeback liability by refunding the cardholder for all issuers. Here's a breakdown of how the service works:
- A cardholder initiates a dispute with a credit card issuer participating in Visa Rapid Dispute Resolution.
- The issuer submits the dispute to Visa Resolve Online (VROL), Visa's online dispute resolution platform.
- The process will pause for a 72-hour Pre-Dispute RDR Auto Decision if the transaction is eligible for Rapid Dispute Resolution.
- At this Auto Decision stage, the system can automatically resolve the dispute. However, if this does not occur, the merchant can investigate the dispute and decide to resolve it or not by refunding the transaction.
- If the merchant accepts the RDR request, the dispute is resolved, Visa debits the acquirer and credits the issuer, avoiding the chargeback.
- However, if the refund request is declined, the VROL system forwards Visa disputes through Allocation and Collaboration workflows and sends disputes to the acquirer.
What is the difference between RDR and CDRN?
Visa Rapid Dispute Resolution and Visa Chargeback Dispute Resolution Network (CDRN) are two distinct services offered by Visa to help merchants manage disputes more effectively. However, it is important to note that Visa Rapid Dispute Resolution represents an enhanced version of Visa's previous legacy platform, known as CDRN.
Visa RDR focuses on streamlining the dispute resolution process by automating pre-dispute resolutions, allowing for faster and more efficient handling of disputes. Comparatively, CDRN provides a platform for merchants to collaborate with issuers and resolve chargebacks through a structured and transparent process. It facilitates communication between merchants and issuers, allowing them to work together to investigate and resolve disputes promptly.
Why is it important to monitor your chargebacks?
It’s important to closely monitor your chargeback rate and frequency. If your chargeback ratio increases, it can negatively impact your business and revenue. This impact ranges from excessive time spent investigating and disputing chargebacks, potential fines received from card schemes if the number of chargebacks is too high and, in worse case scenarios, losing the ability to accept payments.
However, this doesn't mean that merchants should not dispute chargebacks. Card schemes have implemented services to protect both merchants and cardholders by providing each party with an opportunity to investigate and dispute chargebacks.
By proactively monitoring your chargebacks and investing in real-time preventative services, merchants can redirect their focus towards enhancing the quality of their products and services for their customers, while allocating fewer resources to investigate instances that warrant acceptable refunds.
What are the benefits of Visa Rapid Dispute Resolution?
There are three key parties that benefit from the Visa RDR service, and they are issuers, merchants and cardholders. Overall, the service helps improve the cardholder experience whenever a dispute arises for transactions with Visa cards, eliminate unnecessary disputes and speed up the resolution process when a dispute is raised that meets the preset filters.
Benefits for merchants
Alongside a glimpse into the performance of your business, Visa Rapid Dispute Resolution gives merchants more control over their chargeback rates. Accepting financial liability at the pre-dispute stage prevents the dispute from becoming a chargeback. This can also significantly reduce the operational requirements and resources allocated to chargeback management.
Another benefit for merchants is that disputes automatically resolved with Visa Rapid Dispute Resolution do not count against their dispute ratio. However, it is important to note that merchants should not attempt to overuse the service to work around a high dispute ratio. Working with a trusted PSP ensures that merchants receive the necessary support and guidance to navigate complex payment disputes while maintaining integrity and credibility in the eyes of both customers and financial institutions.
A steadily increasing ratio indicates that action is required by the business to understand why customers are increasingly dissatisfied with their product or service. Ignoring such indicators can cost your business more in the long run if you are constantly increasing your cost of acquisition over retaining happy customers.
By working with a trusted PSP, you will also be able to incorporate Visa RDR requirements into existing risk and fraud infrastructure by using your transaction data history. This is to help ensure cardholders aren’t abusing friendly fraud instances specific to your business and industry, or indeed aren’t fraudsters looking to make a false claim.
Benefits for the cardholder
Customers aren’t looking for a seamless payment experience, it is something they simply expect from merchants as the recent shift to mobile and eCommerce payments has elevated customer demands, including access to more payment methods over the pandemic.
Our comprehensive survey results from The Loyalty Paradox Report identified that simplicity and speed (36.3%), using a secure service (36.2%) and using a trusted brand (15.5%) are consumers' top priorities for online payments. In chapters two and three of our New World, One Market report, we also found that product reviews are the fourth-most important factor for customers when making a purchasing decision for products over £50 and tied for third most important with speed for products under £50. Therefore, ensuring your business offers a frictionless experience, including in the refund and chargeback instances, is integral to customer satisfaction and retention.
Too many negative online reviews or word-of-mouth cases will impact a growing number of consumer decisions as your business grows. However, taking proactive measures to improve the cardholder experience by processing certain refunds promptly compared to some chargeback instances is key.
Benefits for issuers
PSPs can work more efficiently and effectively with Visa Rapid Dispute Resolution in handling disputes for their merchants. Chargeback management can be a time consuming and lengthy process. With a clear set of rules that automates pre-dispute resolutions, RDR can help simplify dispute management for issuers.
Enrolling in this service encourages merchants to review their transaction and chargeback history, allowing them to establish a baseline for what is an acceptable refund and what needs to be a chargeback. Once in place, the service enables issuers to resolve disputes in real-time at the pre-dispute stage specific to each merchant’s rules and settings.
Improve chargeback management with emerchantpay
At emerchantpay, we are continually enhancing our real-time risk and fraud management solutions to help improve acceptance rates, and dispute and chargeback management. Our payment specialists work closely with merchants to provide clear guidance on how to proactively prevent chargebacks as much as possible, and ultimately defend chargeback claims with a straightforward, streamlined process.
Striking a balance between automated dispute handling and chargeback management is vital in growing your business with an ever-competing payments offering that is relevant and frictionless for your customers.
If you’re looking to optimise your risk and fraud management with comprehensive chargeback management, get in touch with our regional payment experts.