10.4 – Other Fraud – Card-Absent Environment

DESCRIPTION

Why did I receive a chargeback with reason code 10.4?

You received this chargeback because the cardholder denies authorising or participating in a card-not-present transaction.

Need help managing Visa 10.4 chargebacks?

Let AltoShield help you create a comprehensive chargeback management strategy that can lower risk, reduce costs, boost approvals, and improve processing sustainability.

CLASSIFICATION

How will the issuer classify this type of dispute?

Visa groups reason codes into four categories: fraud, authorisation errors, processing errors, and consumer disputes. Reason codes that start with 10 are in the fraud category.

Fraud-related chargebacks have additional classification requirements.

Prior to filing a chargeback with this reason code, the issuer must submit a TC40 fraud report to Visa. Visit our other guides to learn how TC40 data is used in your VAMP ratio.

ISSUER TIME LIMIT

How long can the issuer wait to file a chargeback with reason code 10.4?

The maximum amount of time that can pass between the transaction processing date and the dispute processing date is 120 calendar days.

VALIDITY

What would make a 10.4 chargeback invalid?

The issuer is not allowed to file a chargeback with reason code 10.4 if any of the following characteristics are present:

• The transaction was an emergency cash disbursement.
• The transaction used straight-through processing.
• The transaction was a mobile push payment.
• The transaction was with a Visa Commercial Choice Omni Product.
• The issuer had previously reported fraud activity for the card and the transaction shouldn’t have been approved.
• The transaction was processed with an account that has already filed 35 or more chargebacks within the last 120 days.
• The transaction was for debt recovery and processed via the Mobility and Transport
• Transaction framework or the Known Fare Transaction framework.
• The transaction yielded an authorisation response code U (the issuer doesn’t participate in the CVV2 program).
• The transaction was a delayed charge that relates to a prior stay, trip or rental period, was properly identified as such, and an electronic imprint was obtained during the same stay, trip, or rental.
• The issuer had previously reported your business as fraudulent.
• The transaction was an authorised purchase of a non-fiat currency or non-fungible tokens but the cardholder was later deceived into sending the items to a fraudulent recipient.
• The dispute qualifies for Visa CE 3.0 protections.
• The transaction’s CVV authorisation request received a code N (no match) but the authorisation request was approved.
• The transaction was fully authenticated by Visa Secure with 3D Secure (both issuer and merchant participate).
• The merchant attempted to authenticate the cardholder with 3D Secure but the issuer doesn’t participate.

NOTE

The 3D Secure liability shift doesn’t apply to transactions processed in the US by merchants with the following MCCs:

• 4829 – Wire Transfer Money Orders
• 5967 – Adult Content and Services
• 6051 – Non-Financial Institutions (Foreign Currency, Liquid and Cryptocurrency Assets, Money Orders, Travelers Cheques, and Debt Repayment)
• 6540 – Non-Financial Institutions (Stored Value Card Purchase/Load)
• 7801 – Government Licensed Online Casinos
• 7802 – Government-Licensed Horse/Dog Racing
• 7995 – Betting, including Lottery Tickets, Casino Gaming Chips, Off-Track Betting, and Wagers at Race Tracks

If you are in one of these MCCs and you authenticate a transaction with 3D Secure, the chargeback still stands. It isn’t invalid.

There are a couple of region-specific reasons for invalid disputes.

In the US, a 10.4 dispute is invalid if an airline or railway merchant shipped tickets to the address on file with the issuing bank (the AVS response was Y) or the issuer does not participate in AVS.

In the US, Canada, and UK, a 10.4 dispute is invalid if the merchant attempted to authenticate the transaction via AVS but the issuing bank did not have the address on file, did not support AVS, or the system could not process the check.

In Kazakhstan, a 10.4 dispute is invalid if the transaction was initiated by reading a QR code with a terminal only capable of processing magnetic stripe data (versus an EMV-compliant chip).

SUPPORTING DOCUMENTS

Can I fight a chargeback if it has reason code 10.4?

Yes. You can and should fight 10.4 chargebacks if you have any of the required evidence.

NOTE

There was a lot of confusion when Visa Claims Resolution (VCR) took effect and introduced the new allocation workflow. Allocation essentially assigns liability to the merchant — there is no “innocent until proven guilty”.

And the fact that the chargeback response phase of the dispute process was replaced with pre-arbitration made many people think they were no longer allowed to fight reason code 10.4 — at least they couldn’t fight without triggering the massive arbitration filing fee.

But the reality is, reason code 10.4 is just like any other reason code — merchants are allowed to fight these fraud-related disputes.

As you’ll see below, Visa outlines dozens of different evidence options for reason code 10.4. Visa wouldn’t provide these options if it didn’t want merchants to use them!

Bottom line: if you have the correct evidence, you can fight and win.

You can fight a chargeback with this reason code as long as you have one of the following:

• Evidence that the chargeback is invalid. (Note: Your acquirer’s technology should catch these errors and automatically respond on your behalf. If your acquirer doesn’t automatically respond and you receive a chargeback notice, you can challenge the chargeback yourself.)
• Evidence that you refunded the transaction before the chargeback was filed.
• Evidence that proves the cardholder no longer wishes to dispute the transaction.
• Evidence that a stay, trip, or rental was disputed improperly. You must show that the transaction relates to a prior stay, trip, or rental period and an electronic imprint was obtained as part of the same stay, trip, or rental.
• Evidence that the dispute qualifies for Visa CE 3.0 protections.
• Evidence that the cardholder’s name is included in an airline’s manifest for a departed flight and matches the name provided on the purchased itinerary.
• Evidence that Visa defines as compelling. The next section has a complete list of acceptable compelling evidence options. This is only applicable in the USA.

PROOF

What compelling evidence is accepted for reason code 10.4?

Visa will accept the following forms of compelling evidence.

• Photos or emails that prove a link between the cardholder and the person receiving the merchandise or services.
• Photos or evidence that prove the cardholder is in possession of the merchandise or is using the goods or services.
• Proof that the cardholder was the actual person picking up a BOPIS (buy online, pick up in-store) order — either the cardholder’s signature on a pick-up form or a copy of the cardholder’s ID.
• Proof that merchandise was delivered to the same address that was verified during checkout with an AVS response code of Y or M (signature is not required as evidence of delivery).
• Proof merchandise was delivered to a business (no signature required), and at the time of delivery, the cardholder was working for the company.
• A signed order form for a mail order or phone order (MOTO) transaction
• Proof that three or more of the following characteristics are present in both the current dispute and a previously un-disputed transaction — the customer’s account or login ID, the delivery address, the device ID or fingerprint, the email address, the IP address, or the telephone number.
• Proof that the transaction was completed by a member of the cardholder’s household or family.
• Proof the cardholder made one or more un-disputed purchases for the same merchandise or service.

There are additional compelling evidence options for specific industries, regions, product types, and billing models.

Digital goods purchased from a website or app

You must provide all of the following:

• A description of what what was downloaded
• The date and time the goods or services were downloaded

And, you must also provide at least two of the following:

• The IP address and the device’s geographical location at the date and time of the transaction
• The device ID number and name of device
• The name and email address linked to the customer profile
• Proof that the user had access the account and you had verified the account prior to the transaction date
• Proof the cardholder accessed the website or app for goods or services on or after the transaction date
• Proof that the device and card used for the disputed transaction was also used in a previously un-disputed transaction

Passenger transport

You must provide evidence that the services were provided. You must also provide any of the following:

• Proof that the ticket was received at the cardholder’s billing address.
• Proof that the ticket or boarding pass was scanned at the gate.
• Frequent flyer miles were earned or redeemed and are tied to the cardholder by address and telephone number.
• Proof that additional purchases were made and correspond to the original transaction — seat upgrades, extra baggage, or onboard purchases

Travel and entertainment

You must provide evidence that the services were provided. You must also prove one of the following:

• Loyalty program rewards were earned or redeemed and are tied to the cardholder by address and telephone number.
• Proof that additional purchases related to the original transaction — such as upgrades — or subsequent purchases were not disputed.

Recurring transactions

You must provide all of the following:

• A legally binding contract with the cardholder.
• Proof the cardholder is using the merchandise or services.
• A previously un-disputed transaction.

European wallet transactions

You must provide proof that an initial transaction to set up a wallet was completed using Visa Secure (3D Secure) but subsequent transactions from the wallet — that did not use Visa Secure — contained all the wallet-related transaction data.

Non-fiat currencies and non-fungible tokens

You may provide any of the following:

• The destination wallet address
• The blockchain transaction hash ( which must be traceable on an open-source website)
• Proof of similar transactions on the same card that were previously approved.

WORKFLOW

Does reason code 10.4 use the allocation or collaboration workflow?

Visa reason code 10.4 is managed with the allocation workflow.

If you want to challenge a chargeback with reason code 10.4, you’ll use pre-arbitration. Gather your documents, compelling evidence, write a rebuttal letter to summarise your case (you can use our rebuttal letter templates), and submit your package for review.

ACQUIRER TIME LIMIT

How quickly do I need to file a chargeback response?

Your acquirer must submit your chargeback response within 30 calendar days of the chargeback filing date.

Note: This is the acquirer time limit. The amount of time you, the merchant, have to prepare and submit your response will be much less. Usually, merchant time limits are about 3- 20 days. Make sure you know how much time your acquirer allows.

PREVENT

How can I avoid these fraud-related chargebacks in the future?

These tips can help you avoid additional 10.4 chargebacks.

• Use available tools to verify cardholder identities — Visa Secure (3D Secure), card security code (CVV2), and address verification (AVS).
• Use pre-authorisation fraud tools to detect criminal activity and block unauthorised transactions.
• Use billing descriptors that are easily recognized. Replace your legal business name with your doing business as (DBA) name.
• Follow up after a purchase has been made to gauge satisfaction and resolve any issues.
• Establish user-friendly policies to prevent friendly fraud masquerading as actual fraud.

If you’d like more information on reducing the risk of chargebacks, visit our blog article.