Chargebacks & Dispute Resolution Flashcards

Which chargeback prevention tool allows merchants to receive early notification of a potential dispute before it becomes a formal chargeback?

Answer: Visa's Order Insight (formerly Visa Merchant Purchase Inquiry)

Visa's Order Insight (VMPI) allows issuers and cardholders to access transaction details directly, enabling dispute deflection before a chargeback is formally filed.

Mastercard's 'Consumer Clarity' program is analogous to which Visa service designed to reduce friendly fraud chargebacks?

Answer: Visa Order Insight

Mastercard's Consumer Clarity and Visa's Order Insight both allow merchants to share transaction details with issuers to resolve cardholder confusion before it escalates to a chargeback.

A merchant's chargeback-to-transaction ratio is 0.8% but their raw chargeback count is 150 per month. Under Visa's VDMP, which condition is relevant?

Answer: Both the ratio threshold AND minimum chargeback count thresholds must be met to trigger monitoring

Visa's VDMP requires BOTH a chargeback ratio above the threshold AND a minimum number of chargebacks (e.g., 100+) to trigger a monitoring program tier.

Which metric is calculated by dividing the total number of chargebacks in a month by the total number of transactions processed in that same month?

Answer: Chargeback-to-transaction ratio

The chargeback-to-transaction ratio (or chargeback rate) is calculated by dividing monthly chargeback count by monthly transaction count and is the primary metric card networks use for monitoring.

What is 'friendly fraud' in the context of chargebacks?

Answer: A cardholder intentionally disputing a legitimate transaction to obtain a refund without returning goods

Friendly fraud occurs when a cardholder files a chargeback on a legitimate transaction they authorized, effectively obtaining goods or services for free.

Which of the following is a proactive strategy for reducing chargeback rates related to 'services not as described' disputes?

Answer: Ensuring product descriptions, images, and return policies are accurate and clearly communicated before purchase

Clear, accurate product descriptions and transparent return policies reduce consumer confusion and set proper expectations, directly lowering 'not as described' dispute rates.

When a card network rules in favor of the issuer during formal arbitration, what financial consequence does the losing acquirer typically face?

Answer: The acquirer pays the chargeback amount plus arbitration fees charged by the card network

When an acquirer loses arbitration, they are liable for the disputed transaction amount plus significant arbitration fees (often $250–$500 per case) imposed by the card network.