Rapid Dispute Resolution: How Does The Process Work?

Chargebacks cause issues that many business owners would rather avoid. The process can be lengthy, and it costs businesses money and their reputation. But what if there were a way to solve payment disputes before they become chargebacks? That’s exactly what Rapid Dispute Resolution (RDR) does.

RDR automatically handles certain payment disputes before they turn into chargebacks. Rather than going through weeks of paperwork and fees, eligible disputes get resolved in minutes with automatic refunds, and this translates into less stress and happier customers for your business.

TL;DR

• RDR automatically refunds certain disputes before they become chargebacks.
• Verifi RDR is owned by Visa and works with most payment processors.
• RDR payments can reduce chargeback rates by up to 70%.
• Merchants set the rules to determine which disputes get automatic refunds.
• RDR works best for businesses with high transaction volumes and recurring disputes.
• Rapid Dispute Resolution Visa network covers 97% of US card issuers and 83% of global card issuers.

What is Rapid Dispute Resolution?

Rapid Dispute Resolution is an automated service created by Verifi that resolves payment disputes before they become formal chargebacks. When a customer disputes a charge on their credit card, RDR can automatically issue a refund based on rules you set up in advance.

Chargebacks can be a real headache for business owners. The total annual chargeback in 2023 was $238 million, and Ethoca predicts that this number can increase to $324 million by 2028.

This is why many business owners are using RDR. Instead of waiting weeks for a dispute to work through the system, RDR solves the problem immediately. The customer gets their money back, and you avoid the chargeback fees and penalties.

How Does the RDR Process Work?

RDR service works through Visa’s network and is available to most businesses that process credit card payments. You don’t need special equipment or software; it works through your existing payment processor. Here’s how it works step by step:

Step 1: Customer Files a Dispute

When a customer sees a charge they don’t recognize or want to dispute, they contact their credit card company. This could be for many reasons, like the customer forgetting about a subscription, receiving multiple charges, or not getting their product.

Step 2: Dispute Enters the System

The card issuer enters the dispute into Visa Resolve Online (VROL), which is Visa’s dispute management system. This happens automatically when the customer files their complaint.

Step 3: RDR Checks Your Rules

RDR payments system immediately checks if the dispute matches any of the rules you’ve set up. Here are some examples to help you put things into perspective:

• Automatically refund any dispute under $50
• Handle all duplicate charge disputes automatically
• Refund subscription cancellation requests immediately
• Process refunds for digital goods disputes

Step 4: Automatic Refund or Manual Review

If the dispute matches your rules, RDR instantly processes a refund to the customer. The whole process takes just minutes instead of weeks. If the dispute doesn’t match your rules, it goes through the normal chargeback process, where you can fight it manually.

Step 5: Customer Gets Their Money Back

The customer sees the refund on their statement quickly, usually within 24 hours. They’re happy because they got their money back fast, and you’re happy because you avoided chargeback fees and penalties.

Key Benefits of Using RDR

Rapid Dispute Resolution offers several important benefits for businesses, including the following:

Cost Savings

The average chargeback amount recorded in 2024 was $169.13, and it typically costs companies fees. Instead of dealing with long dispute processes, fees, and chargeback penalties, RDR refunds certain disputes before they escalate. This can save thousands of dollars per month if your business processes a lot of transactions.

Better Chargeback Ratios

Credit card companies monitor your chargeback ratio closely. Too many chargebacks can result in higher processing fees or even loss of your merchant account. RDR can reduce chargeback rates significantly, and disputes solved through RDR don’t count toward your chargeback ratio, keeping you in good standing.

Improved Customer Experience

Customers hate waiting weeks to get their money back. With RDR, they get refunds in hours instead of weeks. This leads to better reviews and more repeat customers.

Less Administrative Work

It can reduce your workload and allow you to delegate staff elsewhere. Your team doesn’t need to spend time gathering evidence, writing responses, or tracking dispute statuses for simple issues with RDR.

Faster Resolution Times

Traditional chargebacks can take 45 to 90 days to resolve, while RDR chargeback disputes get solved in minutes.

Who Should Use Rapid Dispute Resolution?

Verifi RDR works best for certain types of businesses:

High-Volume Merchants

If you process hundreds or thousands of transactions monthly, you’re likely dealing with regular disputes. RDR automation makes the most sense for businesses with steady dispute volumes.

Subscription-Based Businesses

If you run a subscription-based business, chances are you have frequent subscription disputes. RDR lets you automate solutions for handling recurring issues. Customers often forget about recurring charges or want to cancel services, making RDR perfect for handling these routine requests.

Digital Product Sellers

Businesses selling software, apps, online courses, or digital downloads often face disputes from customers who change their minds. RDR can automatically handle these refund requests.

E-commerce Stores

Online retailers dealing with “item not received” or “not as described” disputes can use RDR to quickly resolve clear-cut cases while focusing manual effort on complex issues.

Businesses with Clear Refund Policies

If you already refund certain types of disputes anyway, RDR just automates the process. This works well for companies with generous return policies.

Setting Up Your RDR Rules

The most important thing with RDR is setting up smart rules. Here are some common rule types:

• Amount-Based Rules: Many merchants automatically refund disputes under a certain dollar amount. For example, you might refund all disputes under $25 automatically since the chargeback fees would cost more than the refund.
• Reason Code Rules: Different dispute types have specific reason codes. You can set RDR to automatically handle codes for duplicate charges, cancelled subscriptions, or processing errors.
• Product Type Rules: This allows refunds for specific transaction types, such as digital goods or subscriptions. You might want different rules for physical products versus digital downloads.
• Time-Based Rules: Some merchants refund disputes that happen within a certain timeframe, like disputes filed within 30 days of purchase.
• Customer History Rules: This rule considers customer history, automatically refunding disputes from first-time customers while requiring manual review for repeat offenders.

Breaking Down the Costs of RDR

Verifi RDR pricing varies by payment processor and transaction volume. Most providers charge a small fee per RDR transaction, typically $10 to $15. This might seem expensive, but consider the alternative:

Chargebacks cost a chargeback fee, the cost of the lost merchandise/service, the cost of administrative time spent resolving the issue, and potential ratio penalties. RDR, on the other hand, will only cost your company an RDR fee and the refunded amount. The comparison table below provides a breakdown of the cost of each option:

Factor	Traditional Chargeback	RDR
Resolution time	45 to 90 days	Under 24 hours
Chargeback fee	$25 to $100	$10 to $15
Lost product or service	Depends on the product or service	Depends on the product or service
Admin time and labor	2 to 4 hours per case	None
Impact on chargeback ratio	Yes	No
Customer satisfaction	Often low due to delays	Often high due to instant resolution
Risks of merchant account closure	Higher	Lower

Even though you still lose the sale amount, you save significant money on fees and time while protecting your chargeback ratio.

Common Challenges and Solutions

Over-Refunding

Some merchants worry about automatically refunding too many disputes, thereby losing money. The way around this is to start with conservative rules and adjust based on data. Begin with small amounts or specific dispute types, then expand as you get comfortable.

False Disputes

Research has shown that RDR can stop about 70% of Visa chargebacks. So there are about 10% of cases that are susceptible to chargebacks. While RDR handles most disputes, some customers may still abuse the system. To avoid this, use fraud protection tools and review your system regularly for suspicious patterns.

Getting Started with RDR – A Step-by-Step Guide

Are you ready to implement Rapid Dispute Resolution for your business? Here’s how to get started:

Step 1: Check Eligibility

All merchants who process Visa transactions are potentially eligible for RDR, except for Payment Facilitator (PF) accounts. Contact your payment processor to confirm you can use RDR services.

Step 2: Analyze Your Disputes

Review your past 6 to 12 months of chargebacks to identify patterns. Look for factors common dispute amounts, frequent reason codes, dispute timing patterns, and the types of products or services involved.

Step 3: Set Initial Rules

Start with conservative rules based on your analysis. You can start with common basic rules like the following:

• Auto-refund disputes under $25-50
• Handle duplicate charge disputes automatically
• Refund subscription cancellations immediately

Step 4: Monitor and Adjust

Track your RDR performance monthly and use your findings to improve your system. Look at the number of disputes resolved, how much you saved on chargeback fees, how satisfied your customers are, and your company’s overall chargeback ratio.

Step 5: Expand Rules Gradually

As you get comfortable with RDR, gradually expand your rules to handle more dispute types and higher amounts.

Integrating RDR with Other Chargeback Prevention Tools

RDR should be just one part of your chargeback prevention system. It works best when combined with other preventive measures such as the following:

• Chargeback Alerts: Services like Verifi’s Cardholder Dispute Resolution Network (CDRN) alert you to disputes before they become chargebacks, giving you a chance to resolve them manually.
• Fraud Prevention: Strong fraud detection reduces illegitimate disputes in the first place. Use tools like address verification, CVV checking, and machine learning fraud detection to identify potential scams.
• Better Customer Service: Many disputes happen because customers can’t reach you easily. Improve your customer service channels to resolve issues before they become disputes.
• Clear Billing Descriptors: Make sure your charges appear clearly on customer statements, as many “unrecognized charge” disputes are caused by confusing billing descriptors.

Industry-Specific Considerations When Implementing RDR

Different industries benefit from RDR in different ways. Here are some industries and how RDR works specifically for them:

• SaaS and Software Companies: Software companies often face disputes from customers who signed up for trials and forgot to cancel. RDR can automatically handle these routine cancellations while preserving goodwill.
• E-learning and Online Courses: Course creators often deal with refund requests from students who changed their minds. RDR can handle these automatically within a reasonable timeframe.
• Subscription Boxes and Services: Monthly subscription services see regular disputes from customers who want to cancel or forget about their subscriptions. RDR automation is perfect for these services.
• Gaming and Entertainment: Gaming companies often face disputes over in-app purchases, especially from minors using their parents’ cards. RDR can quickly resolve these situations.

Final Thoughts

Rapid Dispute Resolution offers a powerful solution for businesses to deal with chargebacks and payment disputes. RDR automatically handles routine disputes, thereby saving money, improving customer satisfaction, and freeing up your team to focus on growing your business.

If you’re ready to reduce your chargebacks and save money on dispute resolution, PayCompass is here for you. Our team will analyze your payment processing issues and recommend the best solutions for your business, from chargeback protection to dispute management. Contact us today, and our experts will be in touch with the next line of action.