Global: Visa UK Implements New Measures to Safeguard SMEs Against “Friendly Fraud”

Visa UK has unveiled a series of innovative measures designed to shield small businesses from the escalating rates of ‘friendly fraud,’ where cardholders dispute legitimate purchases with their card providers.

Visa’s research exposes that within the last year, nine out of ten small businesses have observed a surge in this form of fraud, with up to 20% of transactions challenged.

The surge in friendly fraud impacts both merchants and card issuers. Nationwide Building Society, for example, had to streamline its card dispute process after encountering an extraordinary 251% rise in challenges during the Covid-19 pandemic.

Instances highlighted by Visa encompass a fitness center member who forgets to cancel their subscription, a child initiating a purchase on a parent’s device, unfamiliar billing descriptions, and customers asserting they haven’t received orders or that the items have been delivered in poor condition.

The novel approach, named Visa Compelling Evidence 3.0 (CE3.0), furnishes businesses with more avenues to demonstrate the legitimacy and authorization of a disputed charge by the cardholder. This simultaneously augments protection for merchants without impinging on genuine consumer claims.

CE3.0 now empowers enterprises to provide records of two previous undisputed transactions conducted through the same payment method. These transactions must date back between 120 and 365 days from the dispute date, and there must be a correlation in either the IP address or the device ID/fingerprint across all three transactions. Moreover, at least one supplementary element, like IP address, device ID/fingerprint, shipping address, or account login ID, must also align. Armed with this supplementary evidence substantiating the validity of the contested charge, businesses might then be eligible to retain the funds acquired from the original transaction.

Visa projects that these measures could potentially save UK retailers an estimated £31 million annually by curbing fraudulent claims.

Mandy Lamb, Managing Director of Visa UK and Ireland, states: “Small businesses are the cornerstone of both the UK economy and our local communities. We recognize their crucial significance, and that’s why we are continually refining our protective solutions. These new measures will help assure the safe and secure operations of small businesses while upholding Visa’s Zero Liability Policy, which offers a high level of customer protection.”