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Smart Dispute for Issuers VCR Overview 1

Smart Dispute VCR Overview Smart Dispute for Issuers 7.21

August 2017

Introduction This document provides an overview of Visa’s dispute process, Visa Claims Resolution (VCR). Visa mandates that all card issuers, acquirers, and merchants that accept Visa cards be in production compliance with this process starting in April 2018. The Hong Kong and New Zealand regions must be in compliance starting in October 2017. The VCR initiative simplifies dispute processing by migrating from a litigation-based model to a liability assignment model. VCR uses both transaction data and the Visa Resolve Online (VROL) platform to simplify the processing of disputed transactions by

Confirming that disputes meet the necessary criteria for the selective dispute category

Eliminating invalid disputes wherever possible

Promoting automated liability assignment

Reducing the resolution timeframe for disputes.

VCR flows VCR replaces the terms chargeback, reason codes, and representment with the more

encompassing term “dispute processing.”

The existing 22 reason codes are replaced with 4 dispute categories, with processing defined in 2 flows:

− Allocation: For fraud and authorization dispute categories. Visa will determine an initial liability assignment in real time. Acquirers and merchants will have the ability to respond under certain conditions (e.g., compelling evidence, invalid data, credit issued, and evidence of a manual imprint) by filing pre-arbitration.

− Collaboration: For processing errors and consumer billing dispute categories. While most disputes will fall under the allocation category, a subset will still require interaction between merchants, acquirers, and issuers. Through this process, resolution time frames will be reduced, and streamlined workflows will simplify communication.

Using VCR, disputes are expected to be resolved within 31 days. Currently, disputes typically take approximately 46 days to resolve, with the more contentious issues taking more than 100 days. The VCR initiative will provide more efficient processing and reduce the need for multiple cycles of information exchange and documentation.

Most communication between the Issuer, Acquirer, and Visa occurs by the exchange of real-time xml messages facilitated through the VROL platform. Several processes, such as an exception filing in response to an issuer liable fraud decision, will still require manual entry into the VROL web portal.

These new processes should not be apparent to cardholders. They will still see certain types of errors on their statements that they wish to dispute. However, the process that the Issuer


and the Acquirer must follow to resolve these disputes will change. Pega Smart Dispute for Issuers 7.21 and Pega Smart Dispute for Acquirers 7.21 include these required changes.

Issuer dispute creation Smart Dispute has a redesigned dispute creation process that contains the necessary elements and processes needed by an Issuer to initiate and resolve disputes through VCR, as well as the ability to manage the customer’s dispute in accordance with bank policies and regulatory requirements. Whether the dispute is filed with a Customer Service Representative or through a web self-service, the process is the same:

Identify disputed

transaction

Answer Questions

Set Consumer Reg Flags, SLAs,

Notification

Recovery Channel?

Verifi process3rdParty

Visa Legacy RCA/Chargeback

Lifecycle (through Oct

2017)

Transaction Inquiry

from VROL

Pick a Dispute Reason

Check for Write-off

MC/Amex/ Legacy Visa

CSR Self-Service Mail/Email Auto from SOR

Select Dispute Flow

Ethoca process

MasterCard RCA/Chargeback

Lifecycle

American Express RCA/Chargeback

Lifecycle

VCR

Fraud Report

Intake Channel

Customer’s Business Rules

Allocation

TO:Allocation

Fraud/Authorization

TO:Collaboration

Processing Error/Consumer Dispute

Collaboration

Transaction Inquiry from

VROL (TI in CSR flow available in Spring ’17 patch)

AInvokes Transaction Inquiry services include, at either step in the flow:• Request Tran Inquiry/response • Get Tran details/response• Request Associated trans/response

A

A

Route to Back Office for Review


The steps for creating a dispute include:

1. The transaction to be disputed is identified in the bank’s core transaction system.

2. In customer-friendly language, choose a reason the cardholder is disputing the transaction.

3. The VCR service SubmitTransactionInquiryOperation may be sent to Visa to retrieve transaction data directly from Visa, as well as to identify any “associated transactions” such as credits that may have been issued to offset the selected transaction.

4. Questions that relate to the chosen dispute reason are presented. The questions are designed to gather required information from the customer that is used in determining the validity and outcome of the dispute.

5. Once completed, the system automatically checks business rules that may apply, such as automatic write-off, and sets the appropriate consumer regulation flags and SLAs.

6. The system then evaluates transaction and associated dispute information to determine the appropriate recovery channel. Since Issuers may also subscribe to third-party resolution services, the system will use the Issuer’s rules to determine if or when those should be utilized.

7. If applicable, the system evaluates additional business rules.

8. The system assigns a case number and routes the dispute to the back office for investigation.

9. The VCR service SubmitTransactionInquiryOperation is sent to request all transaction information needed for the dispute (if it had not been performed during the customer Q&A session.) Based on Visa’s requirements, subsequent VCR messages are sent and the responses are processed in the background.

10. A back office user retrieves the dispute to confirm that the necessary data is ready for dispute filing. (The user can configure the dispute filing message to be sent in the background without operator intervention if all validations pass.) Smart Dispute will default the dispute category and any other information required for the filing based on the transaction detail and the customer interview.

11. In real time, Visa evaluates the transaction and question data, and determines whether the Issuer can proceed with filing the dispute.

Smart Dispute has configured the flows to send the request messages at the appropriate points in the flow, and to process the response messages and continue the flow accordingly. The application also includes the connector rules for this real-time interface, so customers will need to update the rules with their Visa-supplied credentials.

Note: The older process and terminology for MasterCard and American Express, such as reason codes and chargebacks, are unaffected in Smart Dispute. They will remain for Visa (referred to as Visa legacy) until the migration date in April 2018.


Allocation flow (Fraud/Authorization categories) VCR uses a “liability-assignment model.” Using the data in the transaction and the responses gathered during the dispute creation process, VCR assigns liability for fraud and authorization-related disputes, following the “Allocation” process.

AllocationFraud/Authorization

Visa Assigns Initial Liability

Accounting

Acquirer Response?

Issuer may file “Exception” through VROL. No VCR messages have been

built yet by Visa for this process

Resolved

Declined

Accepted/No Response

Select Dispute FlowFraud Report

TO:Collaboration

Processing Error/Consumer Dispute

FROM: Intake/Transaction Inquiry

Collaboration

Steps include:

1. The system gathers the required data based on Visa’s specifications and automates the fraud filing. The fraud dispute filing includes the necessary data required for fraud reporting.

2. Visa evaluates the transaction data and responses to the dispute questions gathered during dispute creation and assigns liability in real time.

3. If Visa assigns liability to the Acquirer, the system executes accounting steps as appropriate to settle the dispute and issue necessary credit.

Depending on business rules, the customer may have already received provisional credit. If the customer has not previously received provisional credit, the system will initiate the necessary accounting steps for customer credit and entries to the Visa clearing account.

a. Smart Dispute assumes “VROL initiated financials,” controlled by the data element CreateDisputeFinancial set to Y in SISubmitDisputeQuestionnaireRequest.

b. The Acquirer may accept the liability (or not respond), which resolves the case. The Acquirer may also decline liability by filing a pre-arbitration case.

c. Pre-arbitration must be filed within 30 calendar days.


4. If Visa assigns liability to the Issuer, the Issuer reviews the dispute to determine the next action.

These actions may include write-off, assigning the liability to the customer, or filing an exception request with Visa if there is compelling evidence that would affect the original decision. This is currently available only through the VROL UI. As with dispute creation, the flows are configured to send the request messages in real time at the appropriate points in the flow and to process the response messages and continue the flow accordingly.

Collaboration flow (Processing Error and Consumer Dispute categories) If the dispute involves Processing Errors or Consumer Disputes such as “not as described,” the system proceeds with the “Collaboration” flow.

Acquirer response?Resolved

Declined/Partial Acceptance

Accepted in full/no response

Issuer initiates dispute with acquirer

Initial credit to customer given

(Accounting)

Select Dispute Flow

CollaborationProcessing Error/

Consumer DisputeCollaborationAllocation

FROM: Intake/Transaction Inquiry

TO:Allocation

Fraud/Authorization

Issuer Action?

Resolve as Cardholder liable or writeoff (or

combination of actions)Resolve with customer

Issuer initiates PreArbitration with acquirer for amount

still in dispute (as applicable)

Case filing

Pending Acquirer Response

Acquirer response?Resolved Accepted/no response

Declined

Issuer Action?

Resolve as Cardholder liable or writeoff

Resolve with customer

Issuer initiates Arbitration with

acquirerCase filing

Pending Visa ResponseAssociation response?

Resolved

Issuer

Resolve as Cardholder liable or writeoff

Acquirer

Steps include:

1. Visa evaluates the selected dispute flow and transaction data; Visa then responds to the dispute questions gathered during dispute creation and determines if the information is valid to proceed with the dispute.

2. If validated, Visa sends the information to the Acquirer for a response and issues a preliminary liability decision. Most, if not all, valid collaboration disputes will have initial liability assigned to the Acquirer, which will generate an entry to the bank’s Visa clearing account.


a. Depending on business rules, the customer may have already received provisional credit. If the customer has not previously received provisional credit, the system will initiate the necessary accounting steps for customer credit and entries to the Visa clearing account.

b. The system applies an SLA of 30 calendar days to wait for the Acquirer’s response. The Acquirer must respond within this time frame, as enforced by Visa.

3. If the Acquirer accepts the dispute in full, or does not respond within the 30-calendar day SLA, the dispute is resolved in favor of the Issuer.

4. If the Acquirer responds with a partial acceptance of the amount, or declines the dispute in full, the Issuer reviews the dispute to determine the next action.

a. These actions may include write-off, assigning the liability to the customer, or filing a pre-arbitration case with Visa if there is compelling evidence that would affect the original decision.

b. Depending on the action the Issuer chooses, the appropriate accounting steps are taken to either reverse a previous credit to the cardholder, write the dispute off as a loss, or adjust previous Visa clearing entries.

c. Pre-arbitration must be filed within 30 calendar days.

As with dispute creation, the flows are configured to send the request messages in real time at the appropriate points in the flow and to process the response messages and continue the flow accordingly.

Web services As noted above, Smart Dispute contains all the necessary services required to interact directly with Visa for dispute processing. The data type “Pega VCR Services” lists the SOAP services, REST services, and the data transform rules that are used for the request/response. Also included are data transform rules that can be used in simulation mode for testing and training while not connected to Visa. The services that are required for Issuer VCR processing, and the flows in which they are initiated, are listed below:

Apr-2016 IES/ wsdl Issuer Services Action SD Issuer Flow CloseRFCOperation Internally called in flows VCR_RFC_Fulfillment_Flow CloseTransactionOperation Internally called in flows AcceptAndCloseDispute

FraudReportDetailsOperation Local Action

ViewFraudReport - Flow action EditFraudReport - Flow action called by PegaCard-Sd-Dispute-Visa-International-US-Wki pyDefault case type

GetBatchQueueOperation Internally called in flows Called from Agents GetCollaborationDetailsOperation Internally called in flows HandleVCRGoodFaithResponse GetFulfillmentOperation Internally called in flows VCR_RFC_Fulfillment_Flow GetImageOperation Internally called in flows VCR_RFC_Fulfillment_Flow GetRFCNonFulfillmentOperation Internally called in flows VCR_RFC_Fulfillment_Flow


Apr-2016 IES/ wsdl Issuer Services Action SD Issuer Flow

HyperSearchOperation Internally called in flows

VCR_RFC_Fulfillment_Flow GetArbitrationContactMessages PreComplianceInboundResponse ReviewArbitrationDetails

IgnoreRejectOperation Option-Screen MarkBatchQueueItemAsReadOperation Internally called in flows Called from Agents SubmitCollaborationOperation Local Action InitiateVCRCollaborationFlow

SubmitExceptionOperation Local Action SubmitExceptionFile - Activity called from flows

SubmitFraudOperation Local Action SubmitFraudReport - flow action SubmitRFCOperation Local Action CreateRFC UpdateCaseResolutionStatusOperation Internally called in flows

UploadImageOperation Internally called in flows

Called from UploadImage activity. Called from multiple activities to upload documents to VCR (e.g.: SubmitDisputeFilingRequest Data transform)

CreateCaseFromTransactionOperation Internally called in flows CreateRFC CreateVisaCase

GetAssociatedTransactionListOperation Internally called in flows

AssociatedTranFlow InitiatePreCompForIssuer PreArbitrationInboundResponse VCRPreArbitrationFlow

GetTransDetailsOperation Internally called in flows TranInquiryFlow GetTransInquiryResultsOperation Internally called in flows TranInquiryFlow SubmitTransactionInquiryOperation Internally called in flows TranInquiryFlow AcceptDisputeOperation Internally called in flows AcceptAndCloseDispute AssociatedTranSelectionOperation Internally called in flows AssociatedTranFlow ChangeDisputeStatusOperation Internally called in flows DisputeRecallFlow CreateDisputePreArbOperation Option-Screen VCRPreArbitrationFlow CreateDisputePreArbResponseOperation Option-Screen PreArbitrationInboundResponse CreateDisputePreCompOperation Local Action InitiatePreCompForIssuer CreateDisputePreCompResponseOperation Local Action PreComplianceInboundResponse GetContactMessageDetailsOperation Internally called in flows RespondToArbitrationContactMessage

GetDisputeFilingDetailsOperation Internally called in flows

ArbitrationFlow ComplianceFlow ProcessAssociationDecision ProcessComplRespForAcq ReviewArbitrationDetails

GetDisputePreArbDetailsOperation Internally called in flows PreArbitrationInboundResponse

GetDisputePreArbResponseDetailsOperation Internally called in flows PreArbitrationFlow PreArbResponseProcessing


Apr-2016 IES/ wsdl Issuer Services Action SD Issuer Flow GetDisputePreCompDetailsOperation Internally called in flows PreComplianceInboundResponse

GetDisputePreCompResponseDetailsOperation Internally called in flows PreComplianceInboundResponse ProcessPreCompRespByAcq

GetDisputeResponseDetailsOperation Internally called in flows SubmitAcquirerResponse InitiateDisputeFromTransactionOrCaseOperation Option-Screen DisputeCreationFlow InitiatePreCompFromTransactionOrCaseOperation Local Action InitiatePreCompForIssuer

SubmitContactMessageResponseOperation Option-Screen

ArbitrationFlow ComplianceFlow ArbOrCompWithdrawal VCRAppealArbitrationRulingFlow VCRAppealRulingFlow

SubmitDisputeFilingOperation Option-Screen

ArbitrationFlow ComplianceFlow ArbOrCompWithdrawal VCRAppealArbitrationRulingFlow VCRAppealRulingFlow

SubmitDisputeQuestionnaireOperation Option-Screen DisputeCreationFlow

The services listed below are included with Pega Smart Dispute for Acquirers 7.21. Note that some messages are common to both Issuer and Acquirer:

Nov-2016 IES/ wsdl Acquirer Services Action SD Acquirer Flow CloseTransactionOperation Internally called in flows AcceptAndCloseDispute GetBatchQueueOperation Internally called in flows Called from Agents GetImageOperation Internally called in flows VCR_RFC_Fulfillment_Flow GetRFCAdviceOperation Internally called in flows VCR_Process_RFC_Flow HyperSearchOperation Internally called in flows VCR_RFC_Fulfillment_Flow

GetArbitrationContactMessages PreComplianceInboundResponse ReviewArbitrationDetails

MarkBatchQueueItemAsReadOperation Internally called in flows Called from Agents SubmitCollaborationOperation Local Action InitiateVCRCollaborationFlow SubmitFulfillmentOperation Option-Screen VCR_Process_RFC_Flow SubmitRFCNonFulfillmentOperation Option-Screen VCR_Process_RFC_Flow UploadImageOperation Internally called in flows Called from UploadImage activity; Called

from multiple activities to upload documents to VCR (e.g: SubmitDisputeFilingRequest Data transform)

AcceptDisputeOperation Internally called in flows AcceptAndCloseDispute ChangeDisputeStatusOperation Internally called in flows DisputeRecallFlow CreateDisputePreArbOperation Option-Screen VCRPreArbitrationFlow CreateDisputePreArbResponseOperation Option-Screen PreArbitrationInboundResponse


Nov-2016 IES/ wsdl Acquirer Services Action SD Acquirer Flow CreateDisputePreCompOperation Local Action InitiatePreCompForIssuer CreateDisputePreCompResponseOperation Local Action PreComplianceInboundResponse CreateDisputeResponseOperation Option-Screen AcquirerVCRCollaborationFlow GetContactMessageDetailsOperation Internally called in flows RespondToArbitrationContactMessage GetDisputeDetailsOperation Internally called in flows DisputeCreationFlow GetDisputeFilingDetailsOperation Internally called in flows ArbitrationFlow

ComplianceFlow ProcessAssociationDecision ProcessComplRespForAcq ReviewArbitrationDetails

GetDisputePreArbDetailsOperation Internally called in flows PreArbitrationInboundResponse GetDisputePreArbResponseDetailsOperation Internally called in flows PreArbitrationFlow

PreArbResponseProcessing GetDisputePreCompDetailsOperation Internally called in flows PreComplianceInboundResponse GetDisputePreCompResponseDetailsOperation Internally called in flows PreComplianceInboundResponse

ProcessPreCompRespByAcq InitiatePreCompFromTransactionOrCaseOperation Local Action InitiatePreCompForIssuer SubmitContactMessageResponseOperation Option-Screen ArbitrationFlow

ComplianceFlow ArbOrCompWithdrawal VCRAppealArbitrationRulingFlow VCRAppealRulingFlow

SubmitDisputeFilingOperation Option-Screen ArbitrationFlow ComplianceFlow ArbOrCompWithdrawal VCRAppealArbitrationRulingFlow VCRAppealRulingFlow

Dispute validations

Introduction This section explains how dispute validations for VCR are configured in Pega Smart Dispute for Issuers.

Technical overview Dispute validations are configured in the “Dispute Validations Data” type. The activity “EvaluateDisputeValidations” retrieves the validations that are specific to a category and sub-category. The validations are evaluated and, based on the result, a new assignment is displayed. If the dispute is invalid, write-off, cardholder liable, and continue dispute options are available for the user to proceed with the dispute. The validation summary appears under the VCR tab for future reference.


Data model A new data type “Dispute Validations” is created for configuring VCR dispute validation requirements. The data type has Dispute Category, DisputeSubCategory, Validation details, Region, Disable, and WhenruleName as columns, with DisputeCategory, DisputeSubCategory, and WhenRuleName as primary keys. The records are configured in the data type with the values derived from association guidelines. End users can add or update these records based on client-specific requirements. The Smart Dispute Compliance Subscription will manage and update the validation requirements provided by Visa. We recommend that clients do not change these association validation requirements. Additional validations can be configured as “optional” or “mandatory-policy” to distinguish from scheme requirements.


The activity “EvaluateDisputeValidations” uses the DisputeCategory and DisputeSubCategory as filters for the Data Type. Based on the Dispute Category and Dispute Sub Category, the corresponding rows are retrieved from the data type, and the when rules are evaluated based on the region and the disable check.

The results are copied into a DisputeValidationsList, which is a PageList Property. When the dispute submitted is invalid, for example, if any of the validations evaluate to true, a new assignment is displayed. The user can write-off, make the cardholder liable, or continue the dispute from this assignment, as shown below.


The reason the dispute is invalid is shown in the VCR tab with the validation details and status.

Flow updates The flow rule “DisputeCreationFlow” of PegaCard-Sd-Dispute-Visa- has been modified to include the dispute validations, as shown below. If the dispute is invalid, it will be routed to a “dispute validations” assignment. This assignment has options to resolve or continue the dispute.


Dispute timeframe validations

Introduction This section explains how dispute timeframe validations for VCR are configured in Pega Smart Dispute for Issuers.

Technical overview Dispute time frames are evaluated after submitting qualify dispute and dispute questionnaire assignments. The activity “ValidateTimeframes” performs validations specific to a dispute category, a sub-category, and questionnaire answers in the qualify dispute screen or dispute questionnaire screen. After the rule evaluates the dispute time frames, a new assignment is displayed if the time frame is expired. If the dispute time frame is expired, the write-off, cardholder liable, and continue dispute options are available for the user to proceed with the dispute.

Flow updates The flow rule “InvokeVCRProcessing” of PegaCard-Sd-Dispute-Visa- has been modified to include the Dispute Timeframe Validations, as shown below. If the dispute time frame is expired, it is routed to the “TimeFrameExpireFlow” subflow.


Use the “ValidateTimeframes” activity to check if the dispute timeframe has expired.

The activity performs the following steps:

Based on the Dispute Category and Dispute subcategory, the “Param.TimeFrame” parameter is evaluated.

“Param.DateForTimeFrameCheck” is initialized with the central processing date.

Depending on the questionnaire answers, the dispute time frame may vary. If the respective condition is met, the two parameters “Param.TimeFrame” and “Param.DateForTimeFrameCheck” are over-written.

The “CheckVCRDisputeTimeframes” when rule checks if the dispute timeframe is expired by comparing the current system date with “Param.DateForTimeFrameCheck” and “Param.TimeFrame.”

If “CheckVCRDisputeTimeframes” evaluates to false, the flag “TimeFrameExpired” is set to true.


The “TimeFrameExpireFlow” flow offers multiple options to resolve the dispute, as shown below.

Similar flow changes are done in the below flow rules:

PegaCard-Sd-Dispute-Visa- DisputeCreationFlow

PegaCard-Sd-Dispute- ReviewCustomerInitiatedDispute


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Smart Dispute for Issuers

Document: VCR Overview

Software Version: 7.21

Updated: August 2017

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