One of the unfortunate aspects of dealing with credit card companies is that many of them do have a tendency to treat customers like, well, suspected criminals. When you come to them with a dispute they try to feel you out to see if you’re trying to commit friendly fraud, and resolving claims can be an uphill battle. You can work with a credit card company for twenty years, and they’ll still ask you to prove that you’re on the level when you have an issue that you need addressed. It comes with the territory of high finance, sure, but it still isn’t any fun to deal with as a customer.
Put simply: Credit card companies need to soften their stance a bit and make it easier for card holders to make claims and have their concerns addressed. Unfortunately, there’s not much impetus for them to do this.
The systems that these companies have in place work just fine… for the companies, so why would they bother changing them?
There’s no credit card company that holds a monopoly, but major card companies are a small club, so there isn’t much in the way of competition forcing them to change their ways and improve the experience for the customer.
This is why we have to take our hats off to Visa for changing their process up a bit and making it a little easier for their customers to have their claims addressed. The new VCR, or Visa Claims Resolution system, is a total restructuring of their process from the ground up. It would be inaccurate to say that they’ve “made some changes,” rather, the entire system has been rethought, every step of the way, with nary a trace of the old system that users had to deal with in order to have claims addressed.
Visa’s New VCR System: How Did They Used To Do It?
For years, every claim made through Visa’s resolution system was effectively treated like a courtroom drama. They used a “litigation based” model in order to resolve disputes. A chargeback meant going through days, weeks, even months of back and forth in order to have a decision made. If it prevented friendly fraud, it was only because the effort wasn’t worth it. In fact, it wasn’t worth it even if you had a legitimate claim of anything under a few hundred dollars.
Generally speaking, credit card holders dread making claims, no matter how much evidence they have to back their claim up. The time it would take to get your twenty or thirty or a hundred dollars back was so demanding and exhausting that holders would wind up weighing the time and effort it would take to make a claim and have it recognized versus just putting in a few extra hours at work to make the money back. It was easier to train for the Olympics than it was to pass through Visa’s whole series of checks and balances in order to have your claims resolved.
Visa ran a study and found that, on average, it took about forty six days to resolve a typical chargeback. In one case it took one hundred days. That’s three full months just to find out if you’re getting your five dollars back on that overcharge at the coffee shop.
Simply put, this is ridiculous. And it’s not atypical of the credit card industry. Ask people who carry Mastercard and they’ll tell you that forty six days sounds about right. Put bluntly: That’s no way to treat your customers who entrust you with their hard-earned money, and it’s about time the industry makes a change.
How Do They Do It Now?
The new model being used by Visa aims to bring the typical resolution time down from forty five days to thirty one days or less, so most resolutions will probably be managed in less than a month. They have effectively rebuilt their entire resolution system from the ground up, changing everything from the system itself to their attitude regarding claim resolution. It’s an important step for the company and we can hope that the rest of the industry knows a good idea when they see it and follows suit.
Firstly, they’re not treating claims like courtroom cases anymore. You’re not going to wind up feeling like you’re in a hearing as you make daily calls with the company to have your problems addressed. They are moving away from what they call a “litigation based” model to a “liability assignment” model. What this means is that they assign liability to the concerned party, be they the customer or the merchant. This will help to cut down on fraudulent claims while effectively giving legitimate claimers the benefit of the doubt. That is to say that if your claims are legitimate, then you shouldn’t have a problem taking responsibility for them in the form of liability.
Essentially this means that they’re not treating claimants like criminals anymore. You’re not going to be scrutinized as if you’re trying to commit white collar crime, your claims will be treated as legitimate and valid from the start. This alone is a very positive change for the brand. It always feels like you’re trying to get away with something when you make a legitimate claim, and changing this should make the process a lot less taxing and nerve-wracking for people who have real complaints that they need to have addressed.
Secondly, the process is going to be largely automated from here on out. This means that you’re going to wind up doing a lot less legwork on your own part in order to have a claim addressed. By letting the computers do the heavy lifting, by not having your case scrutinized by countless human beings who, let’s be honest, might turn you down just because they’re having a bad day, a lot of the stress and headaches involved in the claims resolution process will be done away with.
This is not to say that claims resolution is going to be a one hundred percent painless process. Anytime you have to call your credit company and make a complaint, there’s going to be a bit of friction. They’d rather not have to recognize claims or refund money if they can help it. It’s just not a great way to turn a profit when you give people money back and eat a loss yourself. But, Visa recognizes that the current system just isn’t working. So while you still may have to put in a little bit of elbow grease in order to have your claims validated, it won’t be the uphill battle it used to be.
Will Other Companies Follow Suit?
The tricky thing about Visa’s VCR is that they really didn’t have to bother. They weren’t being forced into making changes by new legislation or small credit card companies bringing stiff competition. Paypal recently made a number of changes to their customer interface and services because of companies like Stripe putting the squeeze on them. But there’s no such pressure in the credit card industry. Brands like Visa and MasterCard can effectively do what they like and, as long as it’s legal, customers will tolerate it.
So the short answer is: Don’t hold your breath waiting for other companies to follow Visa’s lead.
It would be great if every credit card company, and sure, every big bank and lender, while we’re on the subject, would make their claims resolution process a little easier. But who’s going to make them do it?
Maybe if customers jump ship from MasterCard to Visa in large enough numbers, MasterCard will rethink their own claims resolution process, but there are slim odds of that happening. People generally aren’t going to stop using their credit card after they’ve gotten used to having it in their wallet.
If some new legislation is introduced to hold credit card companies’ feet to the fire in order to get them to simplify and streamline their process for resolving claims, then you might see some industry-wide change. But without any such pressure from congress or from the free market, other credit card companies will probably follow the rule of thumb that if it isn’t broke, don’t fix it. Well, it is broke, just not for the credit card companies, it’s broke for the customers, who are getting tired of having to win a legal battle every time they want a five dollar refund.
That said, we may see some changes industry-wide over a long period of time. Give it five, ten years, and sure, MasterCard may take advantage of new technology, they may start listening to their customers more, and they may make some changes to how they do business when it comes to claims resolution. But this is a long-term “maybe.” It’s not anything that you can necessarily count on happening, and it’s certainly not something that’s going to happen in the very near future.
Until then, all we can really say is that, if you haven’t selected a credit card company yet, either for personal use or for your business, then you may want to consider going with Visa over their competitors. You’re going to wind up having to make a claim eventually. When you use the service every single day, mistakes will happen. Someone’s going to have to make a claim against your business or you’re going to have to make a claim yourself, and you’re going to need to navigate the claims resolution system that your credit card company has in place. With the standard system that many companies have in place that could mean months of phone calls and written letters and faxes to have your money refunded. With Visa, it probably won’t take more than a month.
A month is probably longer than you want to spend getting your money back, sure, but it’s a massive improvement over the way it has been, and the way it still is with many credit card companies. There are a lot of reasons you might want to go with another company. Maybe they have better customer service or a rewards program that you really like. Visa’s new VCR system might not be reason enough to switch credit card companies just yet. But it is a heck of a tiebreaker if you’re torn between one choice and the other.
In any event, Visa’s new VCR system is a very positive change for the company, for how credit card brands do business, and for the customers. Hopefully the rest of the industry does take these changes to heart and they take some time to reconsider their own process for managing claims from their customers. It’s rough working with a company for decades only to be treated like a common hood when you have a complaint, and it’s good to see that Visa is doing something about it.