As merchants we make efforts to safeguard against fraud. We set up layers of fraud solutions to make sure individuals trying to use fraudulent payment information from successfully making a purchase. Yet we still fall victim to fraud and we accept it as a cost of doing business.
If you accept credit cards, you get chargebacks. That being said, losing revenue to chargebacks doesn’t have to be chalked up to a cost of doing business.
Here’s what ecommerce merchants need to know about what’s likely the most common chargeback reason code they receive: Visa reason code 83.
What is Visa Reason Code 83?
Visa reason code 83 relates to card-absent transactions; including mail order, telephone order, recurring transactions, prepayment, no-show fees, and, of course, Internet transactions. In the Chargeback Management Guidelines for Visa Merchants, Visa reason code 83 is defined as the card issuer receiving either:
- A complaint from the cardholder in regard to a card-absent transaction, claiming that he or she did not authorize or participate in the transaction.
- A card-absent transaction charged to a fictitious account number for which authorization approval was obtained.
Essentially, Visa reason code 83 represents card-not-present (CNP) fraud. This fraudulent activity is either reported by a cardholder or detected by the card issuer. Visa is not the only card network experiencing CNP fraud. MasterCard, American Express, and Discover each have reason codes to represent this type of chargeback.
- MasterCard chargeback reason code 4540
- American Express chargeback reason code C42
- Discover chargeback reason code 7030
However, Visa is the largest card brand in both the United States and the world. According to Nilson, 56% of global card transactions were done on Visa in 2015. For perspective, the next highest was MasterCard with 26%. Outside of Asia, where UnionPay dominates, the majority of credit cards you process will end up being Visa.
The importance of Visa reason code 83 is also displayed when examining the breakdown of reason codes received by clients of Chargeback, a chargeback management company. Data from hundreds of thousands of transactions show that Fraud / No Authorization reason codes represent 57.9 percent of all customer disputes. Visa reason code 83 makes up the bulk of those, representing 44% of all reason codes analyzed by Chargeback! For payment service aggregators like Stripe and PayPal, Visa reason code 83 is grouped into the chargeback category Fraudulent.
What Causes Visa Reason Code 83?
You can receive chargebacks categorized as Visa reason code 83 for a few reasons. The first, and most obvious, is that a cardholder has his or her account number taken by fraudulent means. That results in a merchant processing a CNP transaction from a person who was fraudulently using an account number.
The second cause behind Visa reason code 83 is a cardholder not recognizing a CNP transaction on his or her statement. This could be due to a confusing or unclear merchant descriptor, or the authorized use of the account by a member of the cardholder’s family without the cardholder’s permission. Both cases represent what’s often called “friendly fraud”: The cardholder isn’t a criminal intentionally defrauding the merchant.
Finally, the cardholder could claim he or she did not participate or authorize the transaction, when in actuality they did. This situation, also referred to as chargeback fraud, is the purposeful misuse of chargeback rights by a cardholder. While they seem similar, distinguishing between chargeback fraud and friendly fraud is critical in customer retention and protecting your business.
How Can You Prevent Visa Reason Code 83?
The standard stack of e-commerce fraud prevention can be utilized to prevent Visa reason code 83 chargebacks; including AVS, CVV, geolocation, and Verified by Visa.
Beyond fraud prevention solutions, it’s important that the merchant descriptor that appears on account statements is clearly recognizable to the cardholder. You can reduce chargebacks filed under this reason code simply by working with your payment service provider to ensure your merchant name, phone number, and website are properly identified in the clearing record.
Most merchant descriptors are composed of two variables you choose. Typically the variables are your DBA [doing business as] name and a city. The card issuer determines how many characters show up in each variable, so keep it short. Make sure your DBA name is less than 22 characters and the city field less than 11 characters. Use the city field for your website address or your phone number instead of your city. If the customer performs a quick online search for your company name, web address or phone number they should have their memory adequately jogged, which will prevent the chargeback.
For example, Hotwire’s merchant descriptor is HOTWIRE-SALES FINAL 866-468-9473 CA 94111 USA.
In addition to fraud prevention solutions and merchant descriptors, merchants utilizing recurring billing should take additional precautions to safeguard against chargebacks filed under this reason code. As CNP fraud can be even more prevalent for recurring billing-based businesses. Cardholder account information changes: Accounts can be closed over time and essentially everyone’s account is eventually updated. It could be the CVV or the entire card number. This creates the possibility of declined authorization on recurring payment transactions. If this occurs, be sure to contact the customer to obtain updated payment information.
How Should You Respond to a Chargeback Categorized as Visa Reason Code 83?
While you won’t win Visa reason code 83 chargebacks that are the result of fraudulent use of credit card information, you will win those that are the result of chargeback fraud and friendly fraud. As such, you should respond to every chargeback received, even those categorized under Fraud / No Authorization reason codes like 83.
The compelling evidence needed to respond to Visa reason code 83 chargebacks varies based on the circumstances of the transaction for ecommerce merchants:
- Situation: You obtained authorization for the transaction from the customer, but AVS or CVV2 was not used.
- Your Response: Send a copy of the transaction invoice, signed proof of delivery, and any other information you have pertaining to the transaction to your acquirer.
- Situation: You obtained authorization for the transaction from the customer, and AVS or CVV2 was used.
- Your Response: If you received an authorization approval and an exact match to the AVS query and have proof that the merchandise was delivered to the AVS address, you can send a copy of the transaction invoice, proof of delivery, and any other information you have pertaining to the transaction to your acquirer. Or, if you verified AVS or CVV2 and the card issuer gave a “U” response, inform your acquirer.
- Situation: A transaction was authorized via telephone or mail order.
- Your Response: Provide the signed order form as evidence.
Visa also lists additional allowable compelling evidence that can be provided by merchants to disprove a Visa reason code 83 chargeback. Merchants can provide the evidence, such as photographs, emails, etc. that:
- Proves a link between the person receiving the merchandise or services and the cardholder.
- Proves that the cardholder disputing the transaction is in possession of or is using the merchandise or services.
- The disputed transaction used an IP address, email address, physical address, and telephone number used in a previous, undisputed transaction.
- A member of the cardholder’s family completed the transaction.
- One or more undisputed payments were processed for the same merchandise or service.
The compelling evidence you provide will also change based on method of delivery for your products or services:
- If the cardholder collected the merchandise from the merchant’s physical location, a merchant can provide the cardholder signature on the pick-up form, a copy of identification presented by the cardholder, or details of identification presented by the cardholder.
- If the merchandise was delivered, the merchant should provide evidence of delivery and time delivered to support that the item was delivered to the same physical address for which an AVS match of “Y” (match address and 5 digit ZIP) or “M” (non-U.S. match). Signature is not required as evidence of delivery.
- If the merchandise was delivered to a business address, provide evidence that the merchandise was delivered and that, at the time of delivery, the cardholder was working
for the company at that address. Again, a signature is not required as evidence of delivery.
For digital goods, merchants should provide a description of the downloaded merchandise, the date and time of download, and two or more of the following:
- IP address and device geographical location of purchaser at date and time of purchase.
- Device ID number and device name (if available).
- Name and email address linked to the merchant’s customer profile.
- Evidence that the customer profile was set up by and accessed by the purchaser and was successfully verified by the merchant before the transaction date.
- Proof the cardholder accessed the website or application to use the downloaded goods on or after the transaction date.
- Evidence that the cardholder used the same device and card in previous transactions that were not disputed.
Recurring billing transactions require special compelling evidence. Including evidence of:
- A legally binding contract between the merchant and the cardholder.
- The cardholder using the merchandise or services.
- A previous transaction that was not disputed.
Invalid Visa Reason Code 83 Chargebacks
There are instances where a merchant will receive a chargeback filed under this reason code, when it is actually invalid. Both circumstances are outlined in the Visa Core Rules, as well as Visa Product and Service Rules. A chargeback filed under Visa reason code 83 is invalid in an e-commerce transaction when:
- The merchandise or services were shipped or delivered and the issuer was not a participant in the AVS on the date of purchase and the acquirer received a “U” (system/address information unavailable) response code.
- The transaction has an Electronic Commerce Indicator (ECI) of 5 or 6, indicating a Verified by Visa transaction. In order to benefit from this, the merchant must comply with ECI processes and procedures.
Ecommerce merchants need to be knowledgeable of chargebacks they receive, especially those categorized under Visa reason code 83. Chargebacks are a great lagging indicator of areas of your business that need to be addressed and improved. Here’s some additional resources referenced above to help you make things even better than they are.
- Chargeback Reason Code Encyclopedia
- Fraud prevention and chargebacks
- Visa Core Rules and Visa Product and Service Rules
- Verified by Visa
Chargeback.com provides chargeback-management software for online retailers.
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