opinion

Visa's Order Insight: What It Is and Why You Want It

Visa's Order Insight: What It Is and Why You Want It

It is no secret that chargebacks are the bane of every merchant that sells their goods or services on the Internet. Chargebacks can hit the merchant with not only the loss of the immediate sale, but if they incur too many chargebacks, their processing rates will increase. In some cases, the merchant may be fined or forced to find a new processor in another country, which will usually result in higher fees, thus cutting into the merchant’s overhead. In fact, it has been suggested that for every $1 of fraud from chargebacks, ecommerce businesses lose an extra $2.94.

Chargeback Ratios

Using a good virtual shopping cart and paying attention to the details of your sales can make many chargebacks avoidable.

Chargeback ratios, also known as chargeback rates, are determined by dividing the number of chargebacks into the number of credit card transactions made that month, or the month before, depending on the credit card company you are dealing with, since each brand has their own method of calculating the chargeback ratio. For instance, Visa divides the number of transactions processed by the number of chargebacks filed during the same month, while Mastercard divides the number of transactions processed by chargebacks filed in the previous month.

The thing about chargebacks is that a good portion of them are actually preventable if the merchant is vigilant. Using a good virtual shopping cart and paying attention to the details of your sales can make many chargebacks avoidable.

Types of Chargebacks

There are various forms of chargebacks that you will likely come across. Here are a few of them, and what you can do to help minimize them.

Heading the top of the list are fraudulent charges. Most of the time, this will happen when the credit card owner has either lost their card or it has been stolen. It is probably safe to suggest that rarely will someone steal a credit card then try to use it for an in-person transaction, but it does happen. While few credit cards include a photo of the authorized user, asking for a photo ID is an easy way to at least confirm the names are the same on both.

Online purchases are a little more difficult, but this is where a properly set up shopping cart can be invaluable. While a good shopping cart will usually automatically point out a suspicious transaction, one of the most important settings or tools is the Address Verification Service (AVS). One of the things the AVS verifies is that the billing address entered by the customer is the same as the one associated with the cardholder's credit card account. But another equally important field, and one of the easiest-to-check items, is the telephone number associated with the account. A New York area code with a Nevada zip code is a red flag.

This is a topic I am quite familiar with as, more often than not, I found questionable purchases were very easy to confirm with a quick telephone call. I can only presume that the average cybercriminal does not think the average merchant will go through the trouble of making that call. I am confident that a telephone call eliminated a huge portion of the fraudulent charges that came through our shopping cart. One last comment on this: Do not think that because your product only costs $10 each or per month that no one is going to risk being arrested for using a credit card that does not belong to them. When a credit card is stolen, the information may be sold on the “dark web.” Frequently those buying the credit card information will test it out by making small purchases on the Internet, figuring no one is going to notice a $10 charge. Second on the list of top chargeback reasons is that the customer does not recognize the name of the merchant on the billing statement. I will admit that this is one thing that bugs me the most and happens constantly.

Looking at my own credit card statement, I see a charge associated with “SQ *MY BUSINESS Redondo BeachCA” and one associated with “SQ *MY BUSINESS Hawthorne CA.” Neither makes it very clear where I used my credit card, as Hawthorne and Redondo Beach are both fairly large cities. “SQ *BURNIN DAYLIGHT BREWILomita CA” makes it easy for me to see where that charge was made. The point being that you should always set it so your store's name or domain is displayed so the customer can remember what the purchase was for.

Other chargebacks can result from such things as duplicate charges, cancelled subscriptions, the product not being received or being received in damaged condition, and credits not being applied in a timely manner. While the merchant may have limited ability to ensure that their product arrives to their customer in the same condition as it was when it left, they always have the ability to make sure the customer is satisfied. Replacing items damaged in shipping will go a long way towards making sure your customer is satisfied and keeping your chargeback rate down. No one likes making refunds, but in the long run, it is a lot cheaper than the chargeback it will likely end up being.

Introducing Order Insight

In 2017, VISA introduced the Visa Merchant Purchase Inquiry (VMPI) program to help merchants respond to customer disputes before they became chargebacks, primarily because they had noticed a large increase in disputes due to the cardholders not recognizing transactions on their statement; a significant number of these disputes were for online purchases.

VMPI alerted the merchant so that they can provide additional information about the sale, and hopefully the dispute is resolved prior to the chargeback procedure being implemented.

Around the same time as VMPI was introduced, there was another company, Verifi, which had their own version that they called Order Insight. Apparently VISA liked the capabilities of Order Insight enough that they acquired Verifi in September 2019, and that is why what you may have known as VMPI is now called Order Insight.

The Difference Between VMPI and Order Insight

The primary difference between VMPI and Order Insight is speed. With VMPI, the customer calls their bank to dispute a transaction. The bank has to contact the merchant to provide details on the disputed transaction — but what if the merchant is not available at that time? With Order Insight the bank has a direct connection to the cardholder’s transaction history with the merchant and can provide specific and detailed information, in real time, to the cardholder, thus resolving the dispute.

Granted, there will always be people out there trying their best to get your dollar, but by being careful and utilizing the tools that are out there, you can minimize those losses.

Jonathan Corona is the chief operating officer of MobiusPay.

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