TC40 Fraud Reporting System Flaw Exposed

The TC40 fraud reporting system has a critical flaw that puts merchants in a no-win situation. It lumps true criminal fraud together with "friendly fraud"—where customers dispute legitimate purchases—and treats them all the same .

This creates an impossible dilemma for businesses. Even if you implement perfect fraud prevention protocols, you can still be hit with penalties for friendly fraud. This is especially frustrating in regions like Europe, where mandatory 3D Secure authentication proves the cardholder authorized the transaction. Yet, when that same cardholder later files a dispute, it still counts as "merchant fraud" .

You are effectively being penalized for fraud you prevented and for disputes that were outside your control. So, what is the solution to this systemic issue?

🛡️ How to Fight Back: Modern Tools for a Modern Problem

The solution lies in leveraging advanced tools that address the root of the problem: the lack of communication between issuers and merchants. Specifically, Ethoca Alerts and Verifi's solutions (like RDR and CDRN) are designed to bridge this gap.

🛡 Ethoca Alerts: Your "early warning system" from issuers, giving you a 24-hour golden window to act.
🤖 Verifi RDR: An "automated firewall" that provides instant refunds for rule-based disputes, permanently lowering your chargeback ratio.
🕒 Verifi CDRN: A "72-hour buffer" letting you communicate directly with customers to save the relationship and revenue.

💡 Proactive Strategies and Your Fraud Prevention Toolkit

Simply having these tools is not enough; integrating them strategically into your chargeback management and risk management strategy is key.

• Deploy a Layered Defense: Use Ethoca Alerts and CDRN for high-value transactions where customer intervention is valuable. Implement RDR for low-value transactions where automation saves time and resources . A multi-layered approach ensures comprehensive protection.

• Strengthen Your Evidence with 3DS: While 3D Secure doesn't always stop disputes, it provides compelling evidence. For transactions authenticated with 3DS, the liability often shifts from the merchant to the issuer, strengthening your position in a dispute .

• Optimize Your Overall Fraud Prevention: These alert services work best alongside a robust fraud prevention tool. A strong system that includes machine learning and device fingerprinting can intercept fraudulent transactions before they happen, reducing the volume of TC40 reports and keeping your overall fraud ratios low .

🚀 Take Control of Your Chargeback Management Today

The cycle of being penalized for prevented fraud can be broken. By integrating Ethoca Alerts and Verifi's RDR/CDRN into your operations, you can move from a reactive to a proactive stance.

These tools empower you to:

• Reduce chargeback ratios and avoid costly penalties from programs like Visa's VAMP .

• Recover lost revenue from friendly fraud.

• Improve the customer experience by resolving issues before they escalate.

Don't let a flawed system dictate your profitability.