Compelling Evidence 3.0 by Visa combats friendly fraud


For many merchants, purchase disputes and chargebacks are an inevitable cost of doing business and have been increasing as a result of the major digital transformation.

When a client uses their card to make a legitimate transaction but subsequently files a complaint with their bank, this is known as an unauthorized chargeback, often referred to as friendly fraud.

There are several reasons why this may occur. It’s possible that a cardholder cancels an unused gym membership because they no longer want to travel far to work out.

They call the bank to voice their displeasure with the most recent monthly charge. Or one partner in a pair secretly makes a purchase using the family card without the knowledge of the other.

According to Mark Standfield, president of Midigator, “merchants have been vociferous about the fact that they have been dealing with fraud ‘issues’ such chargebacks that were not genuinely a fraud’ for years.

However, those very same businesses have had trouble persuading banks and credit card companies that disputed transactions are legitimate. Greater fraud-to-sales ratios mean that firms must pay more to perform transactions in the first place and typically have lower transaction approval rates, which has a negative impact on revenue.

Merchants will have a new tool to combat friendly/first-party fraud starting in April, according to Standfield. A change to Visa’s dispute program called “Compelling Evidence 3.0” that takes effect in that month will “give the merchants the ability to ‘prove’ their case that most transactions that have been labeled as “fraud” by the issuing bank are more than likely not “malicious” fraud but its look-alike twin, a version of so-called “friendly”” fraud. And they’ll have the data to support that assertion.