Card schemes like Visa and Mastercard track monthly disputes (also known as chargebacks) against your sales. If the number of disputes exceeds the acceptable limit set by the card scheme, your business might be enrolled in a monitoring program.
Visa uses descriptors to group and calculate fraud rates, allowing transactions to be linked to specific merchants, goods, and services. The formula for fraud rate is the percentage or amount of fraud per month divided by the total sales or amount for that month. Only the first 10 chargebacks or fraud alerts per card are counted, excluding fraud type code 3 (application fraud).
Mastercard uses Merchant IDs (MID) to group transactions and assess fraud levels. The formula is the number of chargebacks per month divided by the total number of successful transactions the previous month, considering only the first 35 chargebacks from the same card.
Other card systems like American Express, Discover, Diners, and JCB identify merchants by their account ID and calculate fraud rate using the formula: either the number of chargebacks or the amount of fraud in a month divided by the total number of successful transactions or total sales amount for the same month.
Visa
Visa has established two monitoring programs to identify merchants with excessive disputes and/or fraud and to promote the use of fraud controls and fair business practices.
The Visa Dispute Monitoring Program (VDMP) and the Visa Fraud Monitoring Program (VFMP) run monthly for 12 months. At the beginning of each month, Visa reviews the previous month’s processing activity and identifies merchants that exceed the program’s thresholds. Your company must exceed both thresholds to be enrolled in the program.
Visa calculates the ratio of disputes to sales as follows: the number of disputes you received in a month divided by the number of sales you processed in that month multiplied by one hundred.
Visa’s Fraud Monitoring Program for 3D Secure (VFMP 3DS) is designed for US customers to monitor and manage domestic 3D-Secure transaction fraud.
The fraud ratio for VFMP-3DS is calculated by dividing the amount (in USD) of fraud reported on 3D Secure transactions in a given month by the amount of sales processed through 3DS in the same month.
Timeline, Fines, and Fees:
- Early Warning: No fines or additional fees are imposed for receiving an early warning.
- Remediation: If your account stays below the standard program thresholds for three consecutive months, it will be removed from VFMP-3DS.
- Uses US domestic 3DS (ECI 5 and 6) fraud and sales transactions processed in the previous calendar month.
- Only the first ten fraudulent transactions in a given month, between you and a single account number, are included.
- Excludes fraud type code 3 (fraud application).
VDMP
- 75 or more disputes, and 0.65% ratio of disputes to sales transactions
- 100 disputes, and 0.9% ratio of disputes to sales transactions
Timeline for 12-Month Card Monitoring Program
- Months 1-4
- Workout period
- No fines
- Months 5-9
- Visa fine of 50 USD per dispute
- Months 10-11
- Visa fine of 50 USD per dispute
- 25,000 USD review fee (non-EU merchants only)
- Might require audit
- Month 12+
- Visa fine of 50 USD per dispute
- 25,000 USD review fee
- Might require audit
- Merchant eligible for disqualification (can no longer process Visa payments)
- 1000 disputes, and 1.8% ratio of disputes to sales transactions
Timeline for 12-Month Card Monitoring Program
- Months 1-6
- Visa fine of 50 USD per dispute
- Months 7-11
- Visa fine of 50 USD per dispute
- Visa can begin to apply a 25,000 USD review fee (non-EU merchants only)
- Month 12+
- Visa fine of 50 USD per dispute
- Visa can begin to apply a 25,000 USD review fee (non-EU merchants only)
- Merchant eligible for disqualification (can no longer process Visa payments)
- 100 disputes, and 0.9% ratio of chargeback to sales transactions and
- One of the following:
- Merchant outlet moved from Visa standard threshold to High-Risk threshold based on a review of merchant performance and inappropriate business practices (e.g., use of abusive free trial policies, negative renewal options, etc.), or
- The merchant exceeds the standard program thresholds and is categorized or should be categorized by a high-brand risk MCC, High-Brand Risk MCCs (MCC 5962, 5966, 5967, 7995, 5912, 5122, 5993), or
- Met or exceeded the program’s Excessive threshold
VFMP
- US $50,000 or more in fraud dollar amount, and 0.65% or higher ratio of fraud to sales dollar amount
- US $75,000 in fraud amount, and 0.9% ratio of fraud to sales dollar amount
Timeline for 12-Month Card Monitoring Program
- Months 1-4
- No penalties
- Months 5-6
- Issuers able to raise fraudulent disputes on 3DS transactions (all markets)
- 25,000 USD
- Months 7-9
- Issuers able to raise fraudulent disputes on 3DS transactions (all markets)
- 50,000 USD
- Months 10-12
- Issuers able to raise fraudulent disputes on 3DS transactions (all markets)
- 75,000 USD
- Month 12+
- Issuers able to raise fraudulent disputes on 3DS transactions (all markets)
- Merchant eligible for disqualification (can no longer process Visa payments)
- US $250,000 in fraud amount, and 1.8% ratio of fraud to sales dollar amount
Timeline for 12-Month Card Monitoring Program
- Months 1-3
- Visa fine of 10,000 USD
- Issuers able to raise fraudulent disputes on 3DS transactions
- Months 4-6
- Visa fine of 25,000 USD
- Issuers able to raise fraudulent disputes on 3DS transactions
- Months 7-9
- Visa fine of 50,000 USD
- Issuers able to raise fraudulent disputes on 3DS transactions
- Months 10-12
- Visa fine of 75,000 USD
- Issuers able to raise fraudulent disputes on 3DS transactions
- Month 12+
- Visa fine of 75,000 USD+
- Issuers able to raise fraudulent disputes on 3DS transactions
- Merchant eligible for disqualification (can no longer process Visa payments)
- US $75,000 in fraud dollar amount, and 0.9% ratio of fraud to sales dollar amount, and
- One of the following:
- Merchant outlet moved from Visa standard threshold to High Risk threshold based on a review of merchant performance and inappropriate business practices (e.g., use of abusive free trial policies, negative renewal options, etc.), or
- The merchant exceeds the standard program thresholds and is categorized or should be categorized by a high-brand risk MCC, High-Brand Risk MCCs (MCC 5962, 5966, 5967, 7995, 5912, 5122, 5993), or
- Met or exceeded the program Excessive threshold
VFMP 3DS
- US $50,000 or more in fraud dollar amount, and 0.65% or higher ratio of fraud to sales dollar amount
- US $75,000 in fraud amount, and 0.9% ratio of fraud to sales dollar amount
VFMP-3DS Standard Program Timeline:
- Months 1-12
- No fines + Merchant loses liability shift protections until they exit the program.
Mastercard
Mastercard operates the Mastercard Acquirer Chargeback Monitoring Program (ACMP), which includes two tiers: Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM). Your placement in either of these tiers depends on the total number of chargebacks received in a month and the ratio of chargebacks to revenue in that month. You will be notified if your business falls under this program.
Mastercard uses the merchant account ID to identify merchants. Each month, they review all merchant accounts that surpass certain threshold limits. Your chargeback ratio is measured in “basis points,” which Mastercard uses to determine the appropriate program tier for your business.
The calculation of basis points is as follows: The number of chargebacks in a specific month is divided by the number of Mastercard transactions processed in the preceding month, then multiplied by 10,000.
ECM
The ECM program, established by Mastercard, is crafted to streamline enforcement and facilitate quicker interactions between acquirers and card networks. Its primary objective is to enhance the accuracy and accountability of the merchant compliance process. As a chargeback control initiative, the ECM program focuses on monitoring e-commerce merchants to curb excessive chargebacks within the Mastercard network.
The ECM program aims to keep chargeback levels within acceptable limits by monitoring merchant activities and imposing fines for non-compliance, thus preserving the Mastercard network’s integrity and encouraging improved transaction and dispute management among merchants.
- A count of at least 100 to 299 chargebacks, and
- A chargeback to transaction ratio (CTR) = 1.5% to 2.99%
| Metrics / Months | 1 | 2 | 3 | 4-6 | 7-11 | 12-18 | 19+ |
|---|---|---|---|---|---|---|---|
| Fine | 0 USD | 1,000 USD | 2,000 USD | 5,000 USD | 25,000 USD | 50,000 USD | 100,000 USD |
| Issuer Recovery Assessment | No | No | No | Yes | Yes | Yes | Yes |
- A count of at least 300 chargebacks, and
- A chargeback to transaction ratio (CTR) = > 3%
| Metrics / Months | 1 | 2 | 3 | 4-6 | 7-11 | 12-18 | 19+ |
|---|---|---|---|---|---|---|---|
| Fine | 0 USD | 1,000 USD | 2,000 USD | 10,000 USD | 50,000 USD | 100,000 USD | 200,000 USD |
| Issuer Recovery Assessment | No | No | No | Yes | Yes | Yes | Yes |
EFM
The EFM program by Mastercard streamlines enforcement and accelerates interactions between acquirers and the card network, aiming to enhance merchant compliance accuracy and accountability.
- 1,000 or more e-commerce transactions and
- The total dollar amount (or local currency equivalent) of fraud related chargebacks in a given month equals or exceeds USD 50,000, and
- The total number of fraud chargeback basis points is equal or more than 50, and
- The percentage of monthly clearing volume processed using 3DS (including Data Only transactions) or Digital Secure Remote Payment (DSRP) is less than 10 percent in non-regulated countries or less than 50 percent in regulated countries
| Metrics / Months | 1 | 2 | 3 | 4-6 | 7-11 | 12-18 | 19+ |
|---|---|---|---|---|---|---|---|
| Fine | 0 USD | 500 USD | 1,000 USD | 5,000 USD | 25,000 USD | 50,000 USD | 100,000 USD |