EXPLAINED

Dispute Monitoring Programs

Written by PayShield

December 8, 2020

Merchants have a financial obligation to card networks to keep disputes and chargebacks to a minimum. If the number of disputes meets or exceeds the threshold set by the networks (e.g Visa & MasterCard) the risk of being placed into a monitoring program increases. Once placed into a program, merchants can incur monthly fines and fees until their dispute and fraud levels are reduced.

Should you find yourself placed in one of these programs, it is critical that merchants take immediate action to address the situation. Inability to comply with the specific requirements of the monitoring program within the given timeline can result in merchant account closure and termination of payment processing privileges.

 

PLEASE NOTE: Starting April 1, 2025, the Visa Fraud Monitoring Program (VFMP) and Visa Dispute Monitoring Program (VDMP) will be replaced by the new Visa Acquirer Monitoring Program (VAMP) for acquirers and their merchants in the Visa Europe region. This initiative is designed to streamline Visa compliance processes in light of widespread ecosystem changes.

Verifi, A Visa Solution, 2024

Visa Dispute & Fraud Monitoring Programs

 

Visa operates two separate chargeback monitoring programs: one for general chargebacks (Visa Chargeback Monitoring Program or VCMP), and one specifically for fraud (Visa Fraud Monitoring Program VFMP).

Visa monitors all merchant dispute activity and on a monthly basis will notify acquirers if any merchants have excessive dispute levels. Once notification has been received, acquirers are required to take immediate action to reduce the merchant’s disputes which includes completion of a Remediation Plan with the merchant to help improve chargeback or fraud mitigation efforts with the end goal to get the merchant out of the risk compliance program.

Visa Dispute Monitoring Program (VDMP)

The VDMP is used to monitor merchants for excessive numbers of disputes.

Monthly Threshold
VDMP Early Warning0.65%* dispute ratio
and 75 chargebacks
VDMP Standard0.90%* dispute ratio
and 100 chargebacks
VDMP Excessive1.80%* dispute ratio
and 1,000 chargebacks

*or higher ratio of dispute count-to-sales count

The VFMP is used to monitor merchants for excessive fraud levels. 

Monthly Threshold
VFMP Early Warning0.65%* of sales
and $50,000
VFMP Standard0.90%* of sales
and $75,000
VFMP Excessive1.80%* of sales
and $250,000

*or higher ratio of fraud dollar-to-sales dollar amount

If a merchant finds themselves on either program, Visa advises the follow actions may be taken:

  • 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.

 

For further information regarding these programs, please refer to the following Visa documentation:

 

MasterCard’s Excessive Chargeback Program is designed to track a merchant’s chargeback activity and quickly determine if the merchant is nearing or has exceeded the monthly chargeback threshold. The network experts each acquirer to monitor these thresholds and take immediate action when a merchant has exceeded acceptable levels.

MasterCard’s Excessive Chargeback Program  has two categories: Chargeback Monitored Merchant and Excessive Chargeback Merchant. If a merchant exceeds a 100-basis point chargeback threshold for one month, it is labeled a Chargeback Monitored Merchant, and remains as such until the number is reduced to an acceptable level. An Excessive Chargeback Merchant is a merchant that exceeds 150 basis points for two consecutive months and remains in this category until numbers falls below 150 for two consecutive months. The Excessive Chargeback Merchant category is a tiered system that is used to further categorize the worst offenders.  In addition to chargeback thresholds, MasterCard also has fraud thresholds. If disproportionate fraud activity is detected the acquirer can terminate merchant account.

Chargeback Monitored Merchant

Number of ChargebacksNumber of Basis Points
At least 100 chargebacksAt least 100 basis points
(1% chargeback ratio)

*MasterCard has different thresholds depending upon where the acquiring bank is geographically located. It’s important to know where the acquiring bank is located to understand the exact limitations.

Excessive Chargeback Merchant

Number of ChargebacksNumber of Basis Points
At least 100 chargebacksAt least 150 basis points
(1.5% chargeback ratio)

*Within the category of Excessive Chargeback Merchant, there are two additional distinctions.

  • A merchant is a Tier 1 Excessive Chargeback Merchant during months one through six.
  • If the merchant is still categorized as an Excessive Chargeback Merchant after the sixth month, the next distinction is Tier 2 for months seven through twelve.

If a merchant reaches Tier 2 of the Excessive Chargeback Merchant program, MasterCard advises the follow actions may be taken:

  • Advise the acquirer to create an action plan or implement other strategies to reduce the merchant’s chargeback-to-transaction ratio.
  • Require the acquirer to undergo a Global Risk Management Program Customer Risk Review.

For further information regarding these programs, please refer to the following MasterCard documentation:

Tier 1 ViolationTier 2 ViolationTier 3 Violation
At least $3,000 in reported fraud Fraud-to-sales ratio between 3% and 4.99%At least $4,000 in reported fraud Fraud-to-sales ratio between 5% and 7.99%At least $5,000 in reported fraud Fraud-to-sales ratio greater than 8%

 

Visa and MasterCard calculate chargeback ratio using the same principal formula, however take data from different time points.

Visa takes the number of chargebacks from the current month and divides it by the number of transactions from the current month. Whereas MasterCard takes the number of chargebacks from the current month and divides it by the number of transactions from the previous month.

VISA

MasterCard

Summary

Mastering dispute management is crucial for securing your business’s financial health and enhancing customer relationships. PayShield offers innovative strategies and tools like 3D Secure 2.0Ethoca AlertsVerifi’s CDRN & RDR, and our industry leading Dispute Intelligence product. Dispute Intelligence revolutionizes chargeback management by automating alert processing, reducing manual effort, and minimizing chargeback ratios. This system seamlessly integrates into your existing setup, providing custom rule sets for handling alerts efficiently, speeding up resolutions, and reducing fees. Contact us today to learn how our tailored solutions can improve your dispute management and safeguard your revenue.

Featured Articles

The Rise of Account-to-Account (A2A) Payments
The Rise of Account-to-Account (A2A) Payments

Account-to-account (A2A) payments are changing the payments industry by providing businesses and consumers with a direct, affordable, and secure alternative for conventional card-based transactions. A2A payments are a strong option for merchants, payment facilitators,...

Get started

Reduce your chargebacks and increase revenue.

Get started

Reduce your chargebacks and increase revenue.