Birth Chargeback

This article was the result of a small study of the differences in the development of the card industry in the United States and Russia. Although the purpose of the study was to identify the factors that gave impetus to the development of electronic currencies in our country, far ahead of the West, despite the fact that the very ideology of building Visa / MasterCard greatly exceeds centralized virtual wallets.

In this story, we will touch only one factor - the Russians' distrust of the cards. And the first detail that immediately catches your eye is Visa Zero Liability on the American Visa website, which states that “you will not be responsible for the unauthorized use of your card. You are protected if your card is lost, stolen or fraudulently used. ” And at the bottom in small letters signed "Covers only cards issued in the United States." But of course, the dear reader knows that this rule is one of the basic rules of the IPU (international payment systems) and works equally well in Russia. Only you have ever heard that at least one bank explained to you - “in which case we will return your money”? Me not.
')


Sometimes the situation even reaches the point of absurdity, when large reputable banks, such as Raiffeisen Bank, sell insurance against “unauthorized use of your card” for 190 rubles per month, they probably offered you something similar. At the same time, if a card is copied without this service, even with a pincode (the chip is not copied), the bank will still have to return the money according to the rules of the IPU. But the majority of banks do not want to deal with claim work, for obvious reasons. Not so long ago, another fairly well-known bank actually “sent” to my work colleague with a request to return a payment of 1000 rubles written off without authorization (rekaring) - “go write a statement to the police”.

Along with the reluctance to do extra work, banks also practice the substitution of concepts. For example, almost all banks advertise 3D Secure technology to cardholders, which generally protects outlets, not cardholders, from fraud in the first place! Historically, the risks of fraud lie on the acquirer and then the acquirer transfers chargebacks to retail outlets. When challenging such payments, the IPU in most cases takes the side of the cardholder. This is where a new type of fraud, the Friendly Fraud, was born - when the cardholder first buys and then contests the payment. And it is 3D Secure that protects the acquirer / point of sale from chargebacks “the card holder did not authorize the transaction” - passed the SMS confirmation, which means it paid for itself. Ordinary cardholder - it’s not warm from 3D Secure, it’s not cold, and Carder certainly won’t buy an iphone where you need to enter an SMS code. Just as this technology protects first of all the issuers themselves - if you don’t support, and the 3D Secure channel –– the issuer already pays for fraud (Liability shift).

A bit of history. In the United States, credit (credit cards) were initially distributed by regular mail — sent in envelopes. In pursuit of distributing as many cards as possible, banks sent cards through phone books, sometimes it came to absurdity - a young child or a pet could get a credit card. Naturally, the cards were stolen from the mailboxes, sometimes even by the mail employees themselves. Banks suffered losses.
This continued until 1970, until the US Congress passed a law prohibiting the distribution of cards without the permission of the holder by mail. At the same time, most cases of fraud included the theft of cards from wallets, pockets, or prostitutes from their clients.

In 1970, a bill was issued “ Title 15 US Code § 1644 - Fraudulent use of credit cards ”. The law was used to indict defendants of using fake, remade, lost, stolen, or fraudulent credit cards. But this did not reduce the number of card frauds.

Finally, in 1974, Congress passed the Fair Credit Billing Act , which first legitimized:

• The 60-day period during which the cardholder may dispute an error in the payment statement.
• If the cardholder finds an error, he must send a challenge in writing to his issuer.
• The cardholder is not liable for using a lost, stolen card, or using a card without permission. In this case, simply call the bank. Although the law sets the maximum responsibility of the holder to $ 50 when using a card (Face-to-Face) Visa / MasterCard does not charge this fee. And when using the card by a fraudster online or by phone, the card holder is completely exempted from liability.

Fair Credit Billing Act and is considered the progenitor of the chargeback. Further, the law was transformed into the rules of the IPU, and the rules overgrown with amendments.

Cards (emission) came to Russia only in the 90s, banks had enough other concerns: trading in securities, banking crisis, etc. So, no one dealt with promotion of cards as a “secure payment method”. Some readers probably remember how we started wallets in order to attach virtual cards to them and pay on the Internet.

And the fact that in the US for decades it has been formed with the help of laws and rules, developing the card industry, we are carefully silenced and not advertised.