Online retailers have no choice but to accept credit cards, so it follows that they must adhere to card issuer policies to remain in good standing. What happens when issuers and payment processors make small changes to those policies? The answer is huge impacts on merchants, especially when it comes to the holiday shopping rush.

Black Friday may seem far off on the horizon. After all, people are just starting to bust out the shorts and flip flops! However, retailers are already starting their preparations. Between ensuring their website’s check out process is running smoothly, anticipating and securing inventory, and creating the great marketing push, getting ready for the holidays is stressful enough without thinking about fraud prevention and chargebacks.

However, considering these elements is precisely what merchants need to start doing in light of new dispute policies rolled out by Visa.

The company recently updated its chargeback and dispute policies, reducing the limit on dispute-to-transaction ratios from 1% to .9%, effective October 1, 2019. While this may sound like a small difference, the truth is that it can take up to 90 days to move the needle in any direction for merchants. This means they need to take action now to avoid negative impacts or disruptive emergencies during the busy season.

What is the dispute ratio and why does it matter for merchants?

Essentially a company’s dispute ratio is the number of disputes filed with card issuers divided by the total number of transactions processed. Before Visa’s recent change, the gold standard for a dispute ratio was 1%, meaning only one percent of processed transactions end with a chargeback dispute.

Customers can dispute charges for several reasons ranging from friendly fraud and legitimate cases of card-not-present (CNP) fraud to cases of customers simply being unhappy with the purchase or product. Chargebacks are designed to be a customer’s last line of defense when dissatisfied with services or products purchased, but it is becoming increasingly common for customers to issue chargebacks as a first resort.

In most chargeback cases, creditors favor the customer resulting in fines and lost revenue for the seller. There are many quantitative costs for merchants in cases of lost disputes—lost inventory, shipping costs, unrecovered sales, fines, and payment processor fees. All of these challenges are in addition to qualitative costs such as reputation damage and bad press, making preparing for Visa’s new dispute policies critical to a successful holiday shopping rush.

What merchants should know about the policy changes

Visa’s recent changes aren’t strictly limited to the dispute ratio dropping. There are several factors making up this policy that merchants should be aware of including:

  • Sellers will be limited to 100 disputes per month
  • Effective October 1, 2019 merchants must have a dispute ratio of .9% or less regardless of the raw number of disputes
  • Dispute appeals do not change dispute ratio, even if the seller is found not responsible for the chargeback
  • Merchants unable to stay under these limits will be subject to being categorized as high brand risk, face additional fees/fines, or could lose the ability to accept Visa at all

The holidays are fast approaching

Though we’re not even into pool party season, the reality is that many consumers start holiday shopping as early as October. Fraud management planning should be underway. While new dispute ratio limits aren’t set to take effect until then, it’s essential to understand that for eCommerce sellers currently hovering around the one percent line it may take up to 90 days to reduce incoming fraud volume by even a tenth of a percent because the margin of error is so low already.

This kind of reduction requires a forward-thinking approach and long-term risk mitigation, which is best accomplished with a proactive fraud prevention solution. Researching, identifying, purchasing, and implementing a new fraud prevention solution can take months even with the easiest integration. These factors make it crucial for eCommerce businesses to begin this cycle as soon as possible to start reducing fraud volume in time for the new rules and subsequent retail rush.


The bottom line is that these changes are going to be effective sooner than many will realize. Rather than procrastinating and risking negative press, lost revenue, or damaging relationships with card issuers, retailers must begin preventing fraud today. The right fraud solution, like our Email Risk Score, will not only detect and help prevent fraudulent purchases, but it will also increase revenue by allowing you to automatically approve more transactions and reduce manual reviews.

Any fraud prevention solution should use a dynamic database that analyzes multiple data points to study and predict user behavior. These predictions can be used to create custom models for individual retailers because risk factors and fraudster targets are as varied as eCommerce stores themselves.

If you’re ready to jump-start your busiest season of the year, request a demo to find out how Emailage can cut loss and improve your bottom line today.