New Visa Merchant Purchase Inquiry (VMPI) Program can Help Reduce Fraud

In an attempt to reduce credit card fraud, and to make chargeback and dispute processes simpler to manage, Visa has launched the new Visa Merchant Purchase Inquiry (VMPI) program as part of their new Visa Claims Resolution (VCR) initiative.

In order to better improve and streamline an outdated system, Visa has created the VMPI and VCR to make life easier for credit card issuers, merchant service providers like us, and merchants who accept credit cards. When Visa tested the program in Hong Kong and New Zealand, they found a 14 percent drop in all chargebacks, so we think they’re onto something..

It also adds a sort of decision-making clearinghouse before a dispute gets turned into a real chargeback. Before that stage, customer disputes are often just inquiries like, “I don’t remember making this payment. What is it?” and then being given that information through the cardholder bank or Visa customer service line.

Rather than elevating that kind of query to an official chargeback, the new VMPI system can clarify forgotten and unknown charges without wasting a lot of time and money. That protects merchants from being hit with chargebacks, which they have to fight and provide documented evidence about the purchase. It also helps reduce costs for cardholder banks because they don’t have to process those erroneous chargebacks.

VMPI uses automation and artificial intelligence to handle many of these low-level, routine tasks instead of sending everything over to human operators to manage. Resolutions can be managed in seconds, and the system can manage dozens, if not a few hundred, disputes in an hour.

The way it works is VMPI connects merchants and cardholder banks so that whenever there’s a dispute, the merchant receives a notification that a customer has started a dispute. The merchant can then respond, and the response is sent back to the bank.

Best of all, the claim and response can happen in real-time, and it allows the merchant to present their own evidence and documentation directly to the cardholder bank. If a cardholder calls in to question a charge, the operator is able to get an answer directly by accessing the VMPI system.

Why is VMPI Important?

According to Visa’s developer website, in 2015 there were more than 2.6 million chargebacks that were initiated because cardholders didn’t recognize the transactions. In fact, this was a 13 percent increase from the previous year. And of all the chargebacks that were initiated, 20 percent were for digital purchases — movies, music, and mobile apps.

This means we can anticipate seeing more and more chargebacks and disputes by customers who simply don’t recognize a recent purchase on their credit card statement, especially as they make more digital and card-not-present purchases.

Imagine what this can do for merchants: rather than dealing with chargeback requests yourself, the responses can be handled automatically. And if you could reduce the number of disputes by 14 percent, imagine how much time and money that could save.

How Does VMPI Work?

According to the Visa Developer site, VMPI works like this:

  1. Cardholder contacts issuer about a transaction they may dispute.  Issuer access Visa Resolve Online (VROL) to identify the transaction.
  2. Visa checks to see if the merchant participates in Visa Merchant Purchase Inquiry.
  3. VROL creates an XML message to send to the merchant with data elements the merchant can use to identify the transaction within their own internal databases.
  4. Merchant identifies transaction and pulls key data elements.
  5. Merchant responds in near-real-time back to VROL.
  6. Visa shares enhanced data (and/or intent to credit account) with issuer, who then uses the data with the cardholder.

— Source: Visa Developer Center

VMPI is ideal for any merchants who get a high number of disputes, have low-dollar transactions, sell digital products, or have free trial periods with automatic renewals.

Of course, there may be a downside to the VMPI.

For the system to work, Visa needs access to each merchant’s transaction data. Sharing it can be fairly complex, so you’ll want to work with a merchant provider who can help you access and properly plug into the system. Second, you are sharing your transaction data with Visa, which could allow them to mine it for their own uses.

But our opinion is that this is a great boon for many merchants because it can help you reduce the number of chargebacks, especially those instigated by customers who just forgot what they purchased, or can’t recognize the transaction based on the transaction code on their credit card statement.

If you want to know more about VMPI and how it can affect you and your business, contact us!