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Visa is actively monitoring the dispute activities of all merchants accepting its cards as payment method. This monitoring is performed on a monthly basis and aims at identifying merchants with excessive disputes. By doing so, Visa is:
- Protecting its brand image
- Limiting the financial exposure for merchants and acquirers
- Giving extra confidence to cardholders
Once a merchant is identified,Visa notifies its acquirer and expects both of them to collaborate and to take appropriate actions to reduce the dispute activity. The acquirer is required to investigate the cause(s) of excessive fraud/dispute, provide information to Visa and to come up with a clear remediation plan. Within 10 calendar days of date on the notification, Visa expects an acceptable remediation plan, a copy of merchant application (if requested) and a copy of merchant contract (if requested). Staying in the visa chargeback monitoring program can lead to penalties and risk of losing Visa acceptance privileges. The merchant will leave the Visa chargeback monitoring program if it remains below the threshold for 3 consecutive months. Note that acquirers are also monitored at portfolio level and must remain below pre-defined thresholds too.
There are two Visa monitoring programs: Visa Fraud Monitoring Program (VFMP) and Visa Dispute Monitoring Program (VDMP). Visa makes a clear distinction between merchants classified high-risk and merchants not classified high-risk. The distinction is made based on the merchant category code (MCC). Find below the applicable thresholds for each program and each merchant type:
VFMP
Merchants meeting or exceeding both of the following thresholds enter the program:
For High-risk MCC merchants
- USD 75,000
- 0,90% fraud-dollar-to-sales-dollar ratio
For Not classified High-risk MCC merchants
- USD 250,000 fraud amount
- 1.8% fraud-dollar-to-sales-dollar ratio
For sake of clarity, a merchant with more than USD 75,000 fraud volume but staying below 0,90% fraud ratio will not enter the program. And vice-versa. It is very unusual to come across merchants with such level of fraud, except tier 1 players in some industries. On the other hand, it is common to come across high risk merchants with fraud ratio exceeding 0,90%, especially with card-not present environment. Merchants can monitor their fraud performance proactively by analyzing the TC40 reports provided by their acquirer. TC40 report compiles the fraud claims generated by issuers.
VDMP
Merchants meeting or exceedingboth of the following thresholds enter the program:
For High-risk MCC merchants
- 100 dispute count
- 0.90% disputes-to-sales transaction count ratio
For Not classified High-risk MCC merchants
- 1000 dispute count
- 1.80% disputes-to-sales transaction count ratio
There are very effective tools to significantly decrease the dispute ratio. Feel free to contact us at info@eflowprocessing.com for more information.
It is important to highlight the fact that fraud performance is calculated based on the volume processed while dispute performance is calculated based on the count of transactions. The metrics are different and therefore the appropriate actions may vary as well.
The thresholds described above are susceptible to change at Visa’s own discretion and may not be accurate at the time your read this blogpost. Please go here for up-to-date information about the Visa chargeback monitoring program.
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