The upside and downside of VisaNet.

Will VISA expire from financial services marketers' passports? it could happen, unless the services are turned from impractical to pragmatic.

JUST about a year ago at the Direct Marketing's 72nd Annual Conference, Steven Schapp, senior vice president of VISA U.S.A., introduced the VisaNet

VisaNet is an address verification system focused on the mail order direct marketing distribution channel. Mail order and telemarketing merchants include a customer's ZIP code and street address during an order, then transmit the data electronically with their merchant's request for transaction approval.

The address information is compared to the cardholder's billing address, and along with the authorization response, the merchant receives a verification code indicating if the information matches the cardholder file. As well, the system extends the validity period of the authorization from one day to a full week, and allegedly facilitates installment purchases charged to the VISA card.

That's the "upside" of VisaNet.

But, as some financial services marketers have discovered, there's a "downside" too.

You see, while facilitating mail order marketers through VisaNet, some merchants are also penalized because the system imposes strict penalties for "charge-backs."

A "chargeback" is the reversal of a charge against a sales draft previously presented by the merchant for payment. There are two primary sources of chargebacks. First, they are bank initiated. Or, second, they are customer initiated.

Now, one face of the chargeback story is covered in an article published in the March 1990 issue of Direct Marketing, written by Michael E. Pramis of Litle & Co., Inc. The premise of the piece is that VISA and MasterCard merchants can reverse a significant amount of chargebacks through the presentation and arbitration process.

But, and a whopping big but it is, Pramis makes two significant points:

(1) The "authorization" code received by a merchant at the point of sale is not an approval of the charge. All it means is that the merchant (substitute you for merchant) has a reasonable expectation of receiving the money.

(2) As far as chargebacks are concerned, it doesn't matter if you have a videotape of the purchaser signing the sales slip, and it doesn't matter if you can absolutely prove the customer made the purchase ... if you are not "right" within the rules of the credit card system - you are out of luck.