Revenue / 03.06.24
Navigating Chargebacks With Visa’s CE3 Guidelines
Christine Payne
Mandi Grimm
Ticketing professionals who join the weekly Wednesday Wisdom calls will likely remember the story Christy Grantham shared in the fall about sleuthing a fraudulent chargeback claim. The Director of Ticketing for The Wilson Center at Cape Fear Community College in Wilmington, North Carolina, chased down what appeared to be compelling evidence about a guest who said she did not buy three tickets to a March 22 performance of “Legally Blonde The Musical,” then posted photos of herself at the show to social media. The customer was also captured in security camera footage alongside her two guests after their tickets were scanned 50 minutes before the curtain. When INTIX Access covered this story, the matter remained unresolved with PayPal.
Holly Sandberg
Fast forward to INTIX 2024 in Las Vegas and chargebacks were once again in the spotlight as experts Mandi Grimm and Holly Sandberg presented a session titled “Navigating Chargebacks with Visa's CE3 Guidelines: Safeguarding Event Ticketing Merchants and Customers” to conference attendees.
Grimm has spent her entire career in ticketing and live events. She started out in multiple ticket offices before moving to Etix, where she is now the Director of Fraud Prevention. Her role includes developing guidelines to win chargeback responses, identifying fraudulent activity and educating clients and peers on ways to combat fraud. After spending 15 years in ticketing focused primarily on payments, fraud and chargebacks, Sandberg became Director of Trust and Safety at Reverb, an online musician marketplace dedicated to buying and selling new, used and vintage instruments.
Grimm and Sandberg opened their INTIX 2024 session by describing a chargeback and CE 3.0 (Compelling Evidence 3.0), sometimes called simply CE3.
Their presentation described a chargeback as a “demand by a credit-card provider for a merchant to make good the loss on a fraudulent or disputed transaction.” It is also, they noted, “a method by which issuing banks, unscrupulous fans, fraudsters, payment processors, etc., can make money seem to magically disappear and cause ticketing professionals to scream into pillows.”
What Is CE 3.0?
CE 3.0 is a set of relatively new merchant rules from Visa, which is leading the charge to address first-party misuse or friendly fraud within the payments universe. Grimm and Sandberg described the regulation implemented in April 2023 as “a promising yet initially frustrating evolution in the rules surrounding compelling evidence as a means to fight chargebacks.”
Many commonly used terms, including “compelling evidence,” are useful to understand when it comes to chargebacks. If you are not familiar with the definitions, check out this helpful handout of key terms that Grimm and Sandberg shared as part of their session.
You will see many of the terms from the handout as you continue reading this story. You’ll also hear them as you are talking about chargebacks with your peers. They include:
- Merchant account
- Cardholder (patron/fan)
- Issuer
- Acquirer
- Merchant
- Merchant bank
- Reason code/description
- Compelling evidence
- First presentment
- Chargeback
- Second presentment
- Pre-arbitration
- Arbitration
- First-party (friendly) fraud
Visa CE 3.0 addresses disputes that are flagged with a specific fraudulent card-not-present reason code. It allows merchants to share two previous transactions to prove a disputed transaction was legitimate. These past transactions show a purchasing history between the merchant (primary ticketer, live event organization or venue) and the cardholder (patron or fan).
“When you get that disputed transaction, it is going to give you specific information, like login information, the delivery address, device ID or fingerprint and IP address,” Grimm said. “Then you need to find two other transactions that took place within 120 and 365 days of the date of that chargeback transaction and you need to match three of these four items. Two of those three items need to either be the device ID or device fingerprint and the IP address.”
To make this easier to understand, Grimm and Sandberg placed the information into a chart of CE3 requirements:
Grimm continued, “A lot of you might be looking at this and thinking you don't have the ability to meet those guidelines and that is probably 100% correct … This is what Visa is asking you to use whenever you are responding [to a chargeback] to make that liability shift; however, it is not a mandate. You can still respond with the original response evidence, but this is what they want you to respond to.”
Consumers do not purchase tickets as often as they buy life staples like groceries. This means event ticketers may not have the frequency of transactions to benefit from CE3 at the same level as other industries. But compelling evidence is still an important part of how you fight chargebacks.
“When I started doing this in 2008, compelling evidence was discarded for the most part in terms of being able to fight disputes, which was very frustrating,” Sandberg said. “You could be doing an investigation on a high dollar chargeback and see on Facebook that somebody took a selfie at a concert with the band behind them on stage, saying, ‘This is the greatest show I have ever been to in my whole life.’ They dispute it and say, ‘I wasn't there, it was my evil twin.’ Then [the credit card company] would just say, ‘The cardholder says they didn't do it.’ That [photo] is irrelevant to the dispute.”
This has evolved over the years and compelling evidence can help organizations recover revenue from chargebacks. Grimm and Sandberg shared the following list from a Visa survey about what respondents felt were the most common types of first-party misuse or friendly fraud.
“I think most of [these survey responses] are really relevant to think about,” Sandberg said. “I take a little bit of issue with [quality of goods not as expected]. When you are thinking about fan experience, there are valid chargebacks. Every chargeback isn't something that I would categorize as first-party fraud. If you spend a lot of money on an experience and you arrive and the performers aren't who it was slated to be, or you arrive and your seat is behind the pillar and you can't see the stage, these are valid things. So, not as described, I think, can be and I would argue shouldn't always be fraud.”
Sandberg continued, “There are instances where [something] … comes in as a fraud dispute, but you do a little bit of digging and say, ‘We don't really think that is what the cardholder is saying. Here's what it got coded as, but it's probably not actually what their intent was when they filed the dispute.’ If you can get at that intent, it may be something that you decide not to fight because you value the relationship with the fan, acknowledge that maybe their experience wasn't the best, and want to take that opportunity to deepen that relationship with the fan rather than argue over a one-time transaction.”
According to the same survey, this is what respondents are doing to combat first-party misuse. Sandberg notes that some may not apply because the 1,100 survey respondents work across various industries, not just live events and entertainment, but that many have significant value.
Click here for a chart detailing the percent using each approach to combat first-party misuse.
“There may be things on this list that you can do directly,” Sandberg said. “If your fraud prevention sits with another vendor partner, you may need to ask what they are doing. I think it is a really good idea to go through this list and say, ‘Are we doing these things? If we are, how effective are they? If we are not, how easy or difficult would they be to adopt? And what do we expect the opportunity would be in terms of doing more to combat [chargebacks and fraud] in terms of having less of it, being able to respond to it when you do see it, and recover that revenue in the cases where you think that's the best thing to do for your customers and fans.’”
While most chargebacks come in after an event, Grimm believes organizations must consider their approach to chargebacks received before an event occurs. She suggests looking at your policy to see if tickets can be refunded.
“That can do a couple of things,” Grimm noted. “Number one, if you are an event or a venue that is settling with an artist and that artist is going to be gone, and then that chargeback can come in two days before the event, you can go ahead and void those tickets, get the tickets off your audit, so your settlement is going to be clean. [Then] you don't have to worry about that chargeback coming in after the fact. On average, it is going to take about 90 days for that chargeback to be resolved, so that money is going to be long gone, your settlement is going to be over, and you are probably not going to get that opportunity to get the money back from the artist. That also allows you the ability to resell those tickets.”
Grimm continued, “If you voided those tickets, the show may or may not be sold out, but then you have the potential of selling those tickets to someone who is going to come. Another thing when you are considering that too, is you may be teaching the customer … Sometimes if you cancel those tickets, then all of a sudden they get a notification that [the] tickets don't work [when they still thought they could come to the event] … So, take a look at that refund policy if it is something you are able to do. It may not be. You may be able to do it for some shows, you may not be able to do it for all shows, but take a look and take into consideration whether or not it makes sense for you and your venue to go ahead and issue that refund if it's before the event.”
“I'm admittedly one of those dorks who likes to read terms and conditions and not just check the box that says that I read them,” Sandberg added. “I have seen some great stuff in terms of what folks were adding into their purchase policy or their terms app purchase, both to prevent as much of this as possible, but also to be able to fight it after the fact if that’s the only thing that you have left in your arsenal.”
Requiring customers to accept your terms and conditions regarding refunds and exchanges versus just including the policy on your website gives you a better case to fight a dispute if and when it happens. This active acceptance could involve a checkbox or something else a customer has to do to continue with their transaction. That is something you will want to call out if you are fighting a chargeback. Also, ask your peers what they are doing and what has worked for their organizations.
Sandberg said, “The best information you can get is from each other and from folks who know the industry. If you were to Google right now, ‘Help! I have chargebacks,’ you would get … folks who could help you with your challenges or maybe couldn't, but they are not going to understand ticketing the way that you all understand ticketing. I think it's a combination of working with your vendor partners, talking with each other and learning about it because there is not a lot of information out there and it is very specific to your challenges. So, get a cup of tea, sit by the fire, pull up some terms and conditions, read them and try not to fall asleep. Compare them to your own [terms and conditions] and see if you have language in there that is protecting you. For the fans who do actually read it before they check the box, great, then they are going to know, ‘Hey, I can't attend this and decide that I want my money back afterwards,’ or … ‘It is not valid for me to say the artist didn't play my favorite song, so I want my money back.’”
Grimm recommends anyone responding to chargebacks should read what the banks want to see included in responses. It is also essential to stay updated on any changes and to ensure your terms and conditions remain compliant.
Tracking your results is important, too, says Sandberg. If you are the merchant of record and have a direct relationship with a processor, check in with your rep if your results are inconsistent. For example, perhaps you have had 10 chargebacks against a certain reason code and submitted virtually the same response and direct, compelling evidence for all of them, but you win six and lose four.
“Go back to that rep and ask why,” Sandberg said. “‘What do we need to do differently? Is it a formatting issue? Do we need less? Do we need more? How can we perform better against this? Can you call out inconsistency?’ The thing with any of these guidelines and regulations is that a lot of [cases are] decided by humans, so they are decided inconsistently. If you are familiar with the rules and regulations, you can absolutely say, ‘Wait a minute. We see a trend where, in general, when we are bringing this information to the table, we are successful in this, but sometimes we're not. Is that an oversight? Is that a problem with the data that we're presenting? How can we address it, or can we?’ But you are not going to know unless you ask those questions.”
If you do not have a direct relationship, ask your vendor partner. “I would be asking them those questions, again, bringing data, saying [for example that] we had 1,000 chargebacks last month, this many were this particular reason code and this is what happened,” Sandberg said. “Then do some analysis, which I think can be a little bit daunting to folks, but it shouldn't be. You can do it with whatever you have available in terms of your needs of looking at that data. If you have something very fancy that does a lot of deep dives and it does a lot of work for you or if it's talking to your finance and accounting departments and saying, ‘This is what happened with the bulk of disputes that we received within a certain period … look at it on a regular basis and make sure that whomever your closest contact is to the results that you're getting, that you're having ongoing conversations with them.”
Editor’s Note: Download the helpful handout of key terms from Grimm and Sandberg’s session here.
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Tags: Revenue , Chargebacks