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  • Writer's pictureDominick Squeo

Unlocking Visa's Success: The Power of Proactiveness in Compelling Evidence 3.0

For merchants processing payments online, Card Not Present (CNP) transactions have always had the risk of chargebacks. While there is not a one size fits all approach for every merchant, being proactive is key to successfully managing chargebacks, as part of an overall fraud strategy including maximizing recovery of lost revenue.

The right balance includes having the proper data to proactively monitor chargeback levels and win rates, keeping in mind the effort and technology that are required to maintain a sustainable and scalable process in instances where the volume of processing along with the amount of revenue continue to grow.

What is Compelling Evidence?

Compelling Evidence, according to Visa’s guidelines “is the act of providing proof the cardholder participated in the transaction, received the goods or services, or benefitted from the Transaction.”

For every merchant, compelling evidence is the foundation for disputing friendly fraud, which for CNP transactions is reported under Condition Code 10.4: Other Fraud – Card-Absent Environment. The requirements for creating a case and submission include several key elements of the transaction(s) that were involved with the cardholder and the merchant at the time of the transaction to prove the transaction was legitimate. This process has continuously evolved over years, with the latest changes by Visa evolving towards stronger collaboration between merchants and issuers in combating friendly fraud at its core. The analysis of data has proven essential over the years to close the gaps between the person behind the screen at the time a transaction is processed by a merchant, and what Issuers know in the event a cardholder disputes a transaction as “fraudulent” or “unauthorized.”

The upcoming changes by Visa with Compelling Evidence 3.0 are slated to roll out on April 15th, 2023. While this may seem daunting for many merchants, there is plenty of opportunity to use the time until then to reevaluate their current fraud strategy in order to successfully incorporate Compelling Evidence 3.0 into their existing process.

What is Visa Compelling Evidence 3.0?

Compelling Evidence 3.0 brings forward the addition of specific data elements in order to prove legitimacy of a transaction by the cardholder with the respective merchant. The goal is “adding a set of checks and balances to draw a clear and direct relationship between the merchant and the cardholder with the use of greater data exchange to more accurately identify transactions authorized by the cardholder, not an unauthorized third party,” as described by Verifi.

There are several data elements being considered as part of establishing a direct relationship between the merchant and cardholder.

  • Account ID/User ID - A unique identifier that is recorded by the merchant to identify the cardholder transacting on the account.

  • IP Address - A unique address which identifies the location of the device by the cardholder transacting with the merchant.

  • Shipping Address - The address used by the cardholder for delivery of physical goods, specific to merchants who ship physical goods to consumers.

  • *For Digital Service or Digital Goods (i.e delivery is sent via email or CTA link for download) - this would not apply.

  • Device ID - A unique identifier for the device(s) used by the cardholder during the transaction with the merchant.

For merchants, the data elements listed in the table below would require that the cardholder has transacted at least 120 Days prior to the disputed transaction with at least one of the data elements being either IP Address or Device ID matching the disputed transaction in order to qualify for protection under Compelling Evidence 3.0. If transaction(s) are identified, they must also be undisputed by the cardholder.

Merchant X offers digital services

Customer A transacted with PAN xxxx1234

Cardholder disputes transaction on February 1st, 2023.

As seen above, the disputed transaction occurred on February 1st, 2023, with the initial transaction on October 1st, 2022, which is 123 days and meeting 2 of the 4 data elements, with both IP Address and Device ID matching the disputed transaction thus qualifying for protection under Compelling Evidence 3.0.

The benefits of protection with Compelling Evidence 3.0 helps to alleviate the responsibilities merchants have in preventing disputes from reaching arbitration along with exempting the transaction from Visa’s fraud ratios.

How to Prepare for the Upcoming Changes?

Merchants should first review the accessibility of the data elements required to respond to a dispute such as an IP Address & Device ID. Along with the data elements, it is important to identify whether the cardholder has transacted 120 days or more before the disputed transaction date to qualify for protection. Merchants who manually respond to chargebacks should consider evaluating their current processes and ensure teams who respond to disputes are trained in identifying transactions that would qualify for protection under Compelling Evidence 3.0.

Merchants who currently use chargeback management software or services offered by Visa such as RDR and Order Insight should speak to their service provider(s) to ensure the requirements for Compelling Evidence 3.0 are properly integrated.

Merchants: Being Proactive is a must

Merchants should always rely on data, and while changes require time to adapt, preparation is key to being proactive. This is also a great time for merchants to reassess their chargeback process. While chargeback losses are always top of mind for merchants, there is plenty of opportunity to recover losses. At FraudX Digital, we have years of experience helping merchants implement a strong chargeback process to prevent losses. For more information about our services and to see how we can help streamline your chargeback process, contact us here.

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