Stay up to speed with Visa Inc. fraud and chargeback programs (December 2015)

As of 1st January 2016, Visa Inc. is restructuring its chargeback and fraud programs.

Overview

In order to simplify operations, Visa Inc. will integrate the current regional and global programs into two new fraud and chargeback monitoring programs: 

  • Visa Chargeback Monitoring Program (VCMP)
  • Visa Fraud Monitoring Program (VFMP)

Main changes:

Faster identification
To eliminate the 60-to-90 day reporting lag, all programs will be based on reported fraud and sales of the previous month.

Uniform program ratios and timelines 
This change will help merchants to align domestic and global metrics, timelines and fees across all markets. 

New rules and policies
Merchants will be defined as either ‘Standard merchants’ or ‘High-Risk merchants’  There are separate programs for each classification (details of classification below).

The purpose of this change is to better align programs across all regions

What does this mean for Adyen merchants?

The purpose of this change is to better align programs across all regions, thereby making it easier for merchants to adjust their practices within the given timeframes.

The changes are as follows:

Legacy programs discontinued
Programs such as: Visa Risk Identification Service Program (RIS) and Visa Merchant Chargeback Monitoring Program (MCMP) will no longer exist.

Domestic/international transactions
Domestic and international transactions will be monitored in Australia, Brazil, Canada and the US. In all other Visa Inc. markets only international transactions will be monitored.

High-Risk vs Standard timelines
All merchants qualified as ‘High-Risk Merchants’ will enter the enforcement period directly and incur fines immediately. ‘Standard Merchants’ will have a notification period of one month followed by a three-month period to get below the threshold.

High risk merchants fulfill at least one of the following criteria: 

1. Those who have a high-risk merchant category code (MCC):

5962 - Direct Marketing - Travel-Related Arrangement Services
5966 - Direct Marketing - Outbound Telemarketing Merchants
5967 - Direct Marketing - Inbound Telemarketing Merchants
7995 - Betting, including Lottery Tickets, Casino Gaming Chips, Off-Track Betting and Wagers at Race Tracks

2. Merchants that have been moved from the standard timeline to the high-risk timeline, at Visa's discretion, based on a review of the merchant’s performance or inappropriate business practices (e.g., use of abusive free trial policies, negative renewal options etc).

3. Merchants that reach or exceed the program’s ‘excessive threshold’:

  • VCMP: The excessive threshold is 500 chargebacks and a 2% ratio of chargebacks-to-sales transactions.
  • VFMP: The excessive threshold is 250,000 USD in fraud and a 2% fraud-to-sales ratio.

All merchants not defined as ‘High-Risk merchants’ are defined as ‘Standard merchants’

New Visa Fraud Monitoring Program Thresholds:

Fraud Rate Fraud $ Fees
Standard threshold 1% $75k No fees*
Excessive threshold 2% $250k Month 1-3: $10kMonth 4-6: $25kMonth 7-9: $50kMonth 10-12: $75k*
Early warning threshold 0.75% $50k N/A


New Visa Chargeback Monitoring Program Thresholds:

CB Rate CB Count Fees
Standard threshold 1% 100 Month 1-4: No feesMonth 5-7: $50 per CBMonth 8-9: $100 per CB & $25k review fee
Excessive threshold 2% 500 Month 1-6 $100 per CBMonth 7-12: $100 per CG & $25k review fee
Early warning threshold 0.75% 75 N/A


*The merchant may be subject to chargeback liability for fraudulent transactions (Chargeback Reason Code 93).

To learn more about the full impact of these changes, including details of timelines, fines and more, please download the relevant document below: 

Please note that this relates to Visa Inc., and programs for Visa Europe will not change at this moment.


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