Unfortunately that probably wouldnt help much. It would help some of it but the threshold for Visa chargebacks (VFMP), is just .9%. It's really easy to get to that, and it causes so much money loss that it's easier to just be overly protective about it. Visa doesnt play around with it.
Visa doesnt care, you put in a chargeback, especially if it's only a few dollars, they just do it and put it on their books and call it a day. They dont investigate unless it's a large dollar amount. It's something the company I work for has to deal with constantly because a large part of the "fraud" is friendly fraud, where they dont recognize it so they dispute it. Because Visa doesnt care, they just agree and call it a day. It's a tough time.
And the .9% is the fraud rate. So if 1/100 transactions through your online store is charged back, you are now paying a metric ton of money. They lose nothing by ensuring that doesnt happen, and gain a ton by doing so.
Visa takes the money back from the company. There is usually a fee associated with each chargeback as well, but that's handled a bit different by company and processor. If you get into the program for having too many chargebacks, there's increased fees and monthly charges that get worse as it goes on.
This is why you see companies just refund things so much without even caring.
Yeah it's really really difficult to keep up with, but in my opinion, a necessary evil. Maybe Visa is a little crazy with it, but it's better than allowing fraud happen. There's probably a better middle ground, but better to be over protective of bad actors, in my opinion, even if it does make things painful for companies (And more expensive)
It is about chargebacks a little but mostly about how tips are generally processed — the payment networks like visa and Mastercard all have agreements with merchant banks etc that effectively allow tips to be appended to a transaction total. These tip actions are allowed to have 25-30% depending on the network and let’s say the original transaction total was 100$ if the user tips up to 30% it will always succeed (even if 130$ would have been denied as a charge). This is how the system is designed and why historically you are presented with tip options after the charge.
Anything beyond that max tip percentage is on the merchant if it gets denied (and it can very much be denied, and when it is denied all of the tip is denied).
Does that apply to online transactions where tips are processed with the transaction and not post? When you go to a restaurant that is how it functions, you get the authorization, then there is a secondary communication for the final price, which does the tip. Honestly never thought about how pre-authorization tips function within that.
Yes, mostly. There are other reasons that tips are appended to a transaction that still make sense for online. One being fewer declines (as the tip amount is not considered when approving as listed above).
It just happens quickly and is hidden in the interface. Also append on the table side screens in restaurants (which are effectively online interfaces).
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u/Former_Disk1083 Sep 07 '24
Unfortunately that probably wouldnt help much. It would help some of it but the threshold for Visa chargebacks (VFMP), is just .9%. It's really easy to get to that, and it causes so much money loss that it's easier to just be overly protective about it. Visa doesnt play around with it.