October 2019 brought new dispute and fraud thresholds as VISA shifts its program. This means that you should monitor your chargeback ratio more closely. What can you do to minimize fraud and chargeback risk?
For context, the VISA Chargeback Monitoring Program (VCMP) and the VISA Fraud Monitoring Program (VFMP) are made to monitor the merchant’s fraud and chargeback risk. While the chargeback ratio refers to the number of chargebacks in a single month divided by the total number of transactions in the same month, fraud ratio is the total value of transactions (in US dollars) lost to fraud in a certain month.
Wondering what the programs are for? They protect the integrity of the VISA payment system and cardholders against fraud.
Simply put, you need to keep chargebacks (also known as disputes) and fraud at an acceptable level. Otherwise, you’ll be put under one of the monitoring programs, which comes with fees and fines.
If the level of disputes is and remains below the standard threshold for three consecutive months, you’ll be removed from the programs. If any of the thresholds are exceeded during this period, you’ll be placed back into the program. Keep in mind that the fine is applicable until removal from the program.
What Are The New Changes ???
VISA Chargeback Monitoring Program
There are three threshold categories: Early warning, Standard, and Excessive.
Early warning is a notification for both merchants and acquirers, so they should investigate it and implement appropriate action before a threshold is exceeded. This means that when the volume reaches a predetermined threshold, you have time to bring the levels down.
Before 1 October 2019 the Early warning started when the dispute rate was 0.75%. Now it’s 0.65% (dispute count remains unchanged and it’s 75). The Standard threshold for dispute rate changed from 1% to 0.9%, and the Excessive threshold from 2% to 1.8%.
|Before October 1, 2019||Now|
|Standard program||100+ dispute count 1% or higher dispute ratio||100+ dispute count 0.9% or higher dispute ratio|
|Excessive program||1000+ dispute count 2% or higher dispute ratio||1000+ dispute count 1.8% or higher dispute ratio|
VISA Fraud Monitoring Program
Keep in mind that both dollar value and chargeback ratio thresholds need to be met.
|Before October 1, 2019||Now|
|Low Risk program||USD 75,000 in fraudulent transactions 1% or higher dispute ratio||USD 75,000 in fraudulent transactions 0.9% or higher dispute ratio|
|High Risk program||USD 250,000 in fraudulent transactions 2% or higher dispute ratio||USD 250,000 in fraudulent transactions 1.8% or higher dispute ratio|
To exit any of the programs you need to keep the chargeback or fraud ratio below the accepted threshold for three consecutive months.
Perhaps 0.1% doesn’t seem a lot, but there are industries (mostly high-risk ones) that can be affected by threshold changes. It also makes a difference for merchants that were dangerously close to the 1% threshold before.
You may want to consider adding Chargeback Alerts to mitigate your chargeback ratio’s and keep your account from getting terminated.
About The Author
Angela De Steffano
Staff writer at High Risk Merchant Account LLC
Angela is a merchant account specialist and heads the marketing team at HRMA-LLC.