Visa and Mastercard roll out changes to fraud and chargeback programs

The global card schemes announced changes to help reduce fraud. They took effect in October 2019.

As part of their ongoing efforts to reduce ecommerce fraud globally, Visa is applying new thresholds to its existing programs, and Mastercard has created a new fraud monitoring program.

Visa’s fraud and chargeback updates apply globally

In October 2019, Visa started applying new thresholds to its Visa Fraud Monitoring Program (VFMP) and Visa Dispute Monitoring Program (VDMP, formerly known as the Visa Chargeback Monitoring Program). Visa’s goal is to improve the efficiency of these programs to reduce fraud and disputes while protecting the integrity of the Visa payment system. The new thresholds, effective globally, are as follow:

Visa Dispute Monitoring Program (VDMP)
Visa Fraud Monitoring Program (VFMP)

Please keep in mind that in order to be identified in the VFMP and/or the VDMP, both the fraud dollar/dispute count and rate thresholds need to be met.

Mastercard's new fraud monitoring strategy

Mastercard’s new global program is called the Excessive Fraud Merchant (EFM) Compliance Program. Starting in October 2019, merchants processing Mastercard are now subject to the EFM program. In order for a company to be flagged in the program, all of the following thresholds will have to be met:

  • At least 1,000 ecommerce transactions
  • At least $50,000 USD in monthly net fraud dollars reported
  • At least 50 basis points in monthly net fraud rate
  • 3DS and/or data-only transactions are less than 10% of total card-not-present volume for non-regulated countries (such as the US, Australia, and Brazil) or less than 50% for countries requiring strong cardholder authentication (such as Singapore and the UK)

For example, a company will be identified in the EFM program for the month of October if:

  • They processed at least 1,000 ecommerce transactions in September
  • Received at least $50,000 USD in fraud chargebacks in September. Fraud chargebacks will include the following reason codes:
  • 4863: Cardholder does not Recognize - Potential Fraud
  • 4837: No Cardholder Authorization
  • Has at least 50 basis points (.50%) in net fraud (where net fraud = count of fraud chargebacks received in September / count of sales for August)
  • The merchant has sent less than 10% (in the US, Australia, and Brazil) or 50% (in Singapore and the UK) of its total card-not-present volume through 3DS and/or data-only

Mastercard's updated chargeback program

Mastercard is updating their existing Excessive Chargeback Program (ECP) with changes to the Excessive Chargeback Merchant program. Starting in October 2019, merchants will be subject to monitoring under Mastercard’s new thresholds for this Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM). The changes in their chargeback program thresholds can be seen in the table below:

As a reminder, Mastercard calculates a merchant’s chargeback rate by comparing chargeback volume in a given month to previous month’s settled transactions. For example, a merchant might be identified as a High Excessive Chargeback Merchant in November 2019 if they received 400 chargebacks in the month of October and settled 12,000 transactions in the month of September (their chargeback rate would be rate would be 333 basis points or 3.33%).

Fines begin next March

Mastercard will start assessing fines globally for merchants identified in their fraud and/or chargeback program starting in March 2020.

With both their new Excessive Fraud Merchant Compliance Program and the changes to their Excessive Chargeback Merchant program, Mastercard is encouraging merchants to adopt best practices towards fraud mitigation, such as implementation of proactive authentication solutions like 3DS or fraud detection tools such as Adyen’s RevenueProtect. Merchants should also adopt best practices for avoiding chargebacks such as having a clear merchant descriptor, issuing proactive refunds, and having a streamlined support team to help address customer concerns.

If you have questions about these changes or would like to learn more about how Adyen’s fraud tool RevenueProtect can help you reduce fraud, please contact one of our sales experts.


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