What is the Visa Chargeback Monitoring Program?

Sydney VaccaroFraud PreventionLeave a Comment

What is the Visa Chargeback Monitoring Program
Visa monitors all merchant disputes activity. On a monthly basis, if any merchant has excessive disputes Visa will notify the acquirer. Once notified acquirers are expected to reduce the merchant’s disputes.

The Visa Chargeback Monitoring Program is Visa’s way of monitoring merchants that receive excessive amounts of fraud or disputes. But this isn’t a program merchants want to be enrolled in. In this post, we will go over Visa’s two monitoring programs, how merchant’s get put on those programs, and how you can monitor your disputes.

What is the Visa Chargeback Monitoring Program?

Visa monitors all merchant disputes activity. On a monthly basis, if any merchant has excessive disputes Visa will notify the acquirer. Once notified acquirers are expected to reduce the merchant’s disputes. Visa says “merchants should work with their acquirer to develop a detailed dispute-reduction plan which identifies the root cause of the dispute issue and an appropriate remediation action(s).”

These remediation actions will depend on the dispute condition, merchant’s line of business, business practices, fraud controls, and operating environment, sales volume, geographic location, and other factors.

The acquirer is required to fill out a VCMP/VFMP Remediation Plan with the merchant. This remediation plan is to help merchants improve their chargeback or fraud mitigation efforts with the goal to get the merchant out of the risk compliance program. The plan starts with a current fraud solution and root cause evaluation. Visa provides a list of available fraud deterrents and asks if the merchant is currently using them. These include :

  • AVS
  • CVV2
  • Verified by Visa
  • Velocity checking
  • Negative/Positive Data Base
  • EMV
  • Geolocation/IP Detection
  • Device Fingerprinting
  • Tokenization
  • Fraud Scrubbing System

The next step is to list out the corrective actions the merchant will take to in order to reduce fraud and disputes. Here Visa does not give a list, but simply a fill-in-the-blank response. Here is where merchants need to show their true game plan to reduce disputes.

Visa Fraud Monitoring Program vs. Visa Chargeback Monitoring Program

Visa has two monitoring programs, Visa Fraud Monitoring Program (VFMP) and Visa Chargeback Monitoring Program (VCMP).

Visa Fraud Monitoring Program

Visa uses this program to monitor merchants that have an excessive amount of fraud. Merchants will find themselves on this list if they meet or exceed the following:

  • USD $75,000 fraud amount
  • 1% fraud-dollar-to-sales-dollar ratio

* calculated on a monthly basis

Visa Chargeback Monitoring Program

Visa uses this program to monitor merchants that have an excessive amount of disputes. Merchants will find themselves on this list if they meet or exceed both of the following:

  • 100 Dispute count
  • 1% ratio of disputes-to-sales transaction count

* calculated on a monthly basis

If a merchant finds themselves on either program, Visa warns they may do either or both of the following:

  • Assess a non-compliance assessment per merchant per month to the acquirer.
  • Permanently disqualify the merchant and its principals from participating in the Visa Program.

Dispute Monitoring

To make sure you do not end up the Visa Chargeback Monitoring Program it is important for merchants to monitor disputes. Visa gives the following as general recommendations for dispute monitoring:

  • Track disputes and dispute responses by conditions. Each condition is associated with unique business issues and requires specific remedy and reduction strategies.
  • Track dispute activity as a proportion of sales activity.
  • Include initial dispute amounts and net disputes after dispute response.
  • Track card-present and card-absent disputes separately. If your business combines traditional retail with card-absent transactions, track the card-present and card-absent disputes separately. Similarly, if your business combines mail order/telephone order (MO/TO) and Internet sales, these disputes should also be monitored separately.

If you want to take a closer look at all the in’s and out’s of the program, you can check out the following Visa documentation:

Dispute Management Guidelines for Visa Merchants

Visa Core Rules and Visa Product and Service Rules

How To Calculate a Chargeback Ratio

One of the most important factors you can track to make sure you stay off the Visa Chargeback Monitoring Program is chargeback ratio. Both Visa and MasterCard calculate the ratio in the same way, but they use different numbers. Visa takes the number of chargebacks from the current month and divides it by the number of transactions from the current month.

MasterCard takes the number of chargebacks from the current month and divides it by the number of transactions from the previous month. Here’s how Visa calculates the ratio:

 

Month

Transactions

Chargebacks

Chargeback Ratio Calculation

Visa Chargeback Ratio

May

12,678

23

23/12,678

0.18%

June

10,627

15

15/10,627

0.14%

July

11,834

72

72/11,834

0.61%

 

This ratio needs to stay below 1% to stay off of the Visa Chargeback Monitoring Program (VCMP).

Always Working Towards a Lower Dispute Rate

No matter where your chargeback ratio is at or how close to a monitoring program you are, lowering your dispute rate should always be a priority. Being able to prevent a dispute from happening retains revenue, stops fraud loss and saves time.

The Visa Chargeback Monitoring Program is Visa’s way of monitoring merchants that receive excessive amounts of fraud or disputes. But this isn’t a program merchants want to be enrolled in. In this post, we will go over Visa’s two monitoring programs, how merchant’s get put on those programs, and how you can monitor your disputes.

What is the Visa Chargeback Monitoring Program?

Visa monitors all merchant disputes activity. On a monthly basis, if any merchant has excessive disputes Visa will notify the acquirer. Once notified acquirers are expected to reduce the merchant’s disputes. Visa says “merchants should work with their acquirer to develop a detailed dispute-reduction plan which identifies the root cause of the dispute issue and an appropriate remediation action(s).”

These remediation actions will depend on the dispute condition, merchant’s line of business, business practices, fraud controls, and operating environment, sales volume, geographic location, and other factors.

The acquirer is required to fill out a VCMP/VFMP Remediation Plan with the merchant. This remediation plan is to help merchants improve their chargeback or fraud mitigation efforts with the goal to get the merchant out of the risk compliance program. The plan starts with a current fraud solution and root cause evaluation. Visa provides a list of available fraud deterrents and asks if the merchant is currently using them. These include :

  • AVS
  • CVV2
  • Verified by Visa
  • Velocity checking
  • Negative/Positive Data Base
  • EMV
  • Geolocation/IP Detection
  • Device Fingerprinting
  • Tokenization
  • Fraud Scrubbing System

The next step is to list out the corrective actions the merchant will take to in order to reduce fraud and disputes. Here Visa does not give a list, but simply a fill-in-the-blank response. Here is where merchants need to show their true game plan to reduce disputes.

Visa Fraud Monitoring Program vs. Visa Chargeback Monitoring Program

Visa has two monitoring programs, Visa Fraud Monitoring Program (VFMP) and Visa Chargeback Monitoring Program (VCMP).

Visa Fraud Monitoring Program

Visa uses this program to monitor merchants that have an excessive amount of fraud. Merchants will find themselves on this list if they meet or exceed the following:

  • USD $75,000 fraud amount
  • 1% fraud-dollar-to-sales-dollar ratio

* calculated on a monthly basis

Visa Chargeback Monitoring Program

Visa uses this program to monitor merchants that have an excessive amount of disputes. Merchants will find themselves on this list if they meet or exceed both of the following:

  • 100 Dispute count
  • 1% ratio of disputes-to-sales transaction count

* calculated on a monthly basis

If a merchant finds themselves on either program, Visa warns they may do either or both of the following:

  • Assess a non-compliance assessment per merchant per month to the acquirer.
  • Permanently disqualify the merchant and its principals from participating in the Visa Program.

Dispute Monitoring

To make sure you do not end up the Visa Chargeback Monitoring Program it is important for merchants to monitor disputes. Visa gives the following as general recommendations for dispute monitoring:

  • Track disputes and dispute responses by conditions. Each condition is associated with unique business issues and requires specific remedy and reduction strategies.
  • Track dispute activity as a proportion of sales activity.
  • Include initial dispute amounts and net disputes after dispute response.
  • Track card-present and card-absent disputes separately. If your business combines traditional retail with card-absent transactions, track the card-present and card-absent disputes separately. Similarly, if your business combines mail order/telephone order (MO/TO) and Internet sales, these disputes should also be monitored separately.

If you want to take a closer look at all the in’s and out’s of the program, you can check out the following Visa documentation:

Dispute Management Guidelines for Visa Merchants

Visa Core Rules and Visa Product and Service Rules

How To Calculate a Chargeback Ratio

One of the most important factors you can track to make sure you stay off the Visa Chargeback Monitoring Program is chargeback ratio. Both Visa and MasterCard calculate the ratio in the same way, but they use different numbers. Visa takes the number of chargebacks from the current month and divides it by the number of transactions from the current month.

MasterCard takes the number of chargebacks from the current month and divides it by the number of transactions from the previous month. Here’s how Visa calculates the ratio:

Date

Transactions

Disputes

Calculation

Ratio

May

12,678

23

23/12,678

0.18%

June

10,627

15

15/10,627

0.14%

July

11,834

72

72/11,834

0.61%

This ratio needs to stay below 1% to stay off of the Visa Chargeback Monitoring Program (VCMP).

Always Working Towards a Lower Dispute Rate

No matter where your chargeback ratio is at or how close to a monitoring program you are, lowering your dispute rate should always be a priority. Being able to prevent a dispute from happening retains revenue, stops fraud loss and saves time.

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