Visa and Mastercard apply new strategies against fraud and chargebacks

The novelties from leaders of the market, Visa and Mastercard

Visa and Mastercard apply new strategies against fraud and chargebacks. Source: shutterstock.com

The major payment systems recently revealed their ideas on how to reduce fraud. The first changes will take place in October 2019.

As a component of its continuous endeavors to lessen e-commerce fraud worldwide, Visa applies new limits/thresholds to its current programs, and Mastercard has succeeded in creating a new program that monitors fraud.

Visa’s solution on how to reduce fraud and chargebacks worldwide

From the beginning of October 2019, Visa will be implementing a new threshold policy to enhance the effectiveness of its Visa Fraud Monitoring Program (VFМР) and Visa Chargeback Monitoring Program (VCМР). Visa will also be improving the efficacy of its programs in order to decrease the number of cases of fraud and issues related to chargebacks while securing its payment system. Here are the new thresholds, which guarantee effectiveness:

Visa Fraud Monitoring Program (VFМР) – effective globally

Before October 2019

Fraud dollars Fraud rate
Early warning $50,000 0.75%
Standard status $75,000 1.00%
Excessive status $250,000 2.00%

After October 2019

Fraud dollars Fraud rate
Early warning $50,000 0.65%
Standard status $75,000 0.9%
Excessive status $250,000 1.8%

Visa Chаrgеbасk Monitoring Program (VCМР)

Before October 2019

Chargeback fraud Chargeback rate
Early warning 75 0.75%
Standard status 100 1.00%
Excessive status 1,000 2.00%

After October 2019

Chargeback fraud Chargeback rate
Early warning 75 0.65%
Standard status 100 0.9%
Excessive status 1,000 1.8%

Actually, it’s time to tell you what the Visa Chargeback Monitoring Program and Visa Fraud Monitoring Program are. They are programs developed by Visa, and their major functions are fully described by their names (they are basically chargeback monitoring and anti-fraud programs). They were intended to help salesmen with managing their fraud and chargeback risks.

Obviously, this is by no means an exhaustive list of basic functions of these programs.

Visa Chargeback Monitoring Program

contactless payments

The basic VCМР has such a thing as an enforcement period. Source: shutterstock.com

The basic VCМР has such a thing as an enforcement period (and it lasts for eight months). First three months of an enforcement period, Visa will penalize a user’s acquirer $50 for each сhаrgеbасk filed against the user, which the acquirer at that point deducts from their account. If the system identifies a merchant as one with “excessive” сhаrgеbасks, an enforcement period will be twelve months.

Moreover, both of the program plans (regular and the excessive ones) imply that a user is subject to a $25,000 review fee toward the end of their enforcement period.

Visa Fraud Monitoring Program

Visa has developed this program to monitor merchants with an excessive amount of fraud. The basic VFМР also has an enforcement period of eight months. The basic VFMP implies no fines, while the fraud liability protection offered by 3-D Secure is not the most joyful part of this program. Instead, Visa will automatically assign you liability for fraud-related disputes (reason code 10.5 under Visa Claims Resolution).

Visa has developed this program to monitor merchants with an excessive amount of fraud. Source: shutterstock.com

MasterCard’s newest fraud monitoring strategy

In the United States, MasterCard has called its new program the “Excessive Fraud Merchant (ЕFМ) Compliance Program”. The company plans to launch this program in October 2019. Thus, merchants processing MasterCard in the US will be subject to the EFM program. A company will have to meet the following thresholds to be identified in the program:

  • No less than 1,000 e-commerce transactions
  • No less than $50,000 in monthly net fraud dollars reported
  • No less than 50 basis points in the monthly net fraud rate
  • 3DS and/or data-only transactions are less than 10% of the total card-not-present volume

MasterCard’s newest fraud monitoring strategy. Source: shutterstock.com

For instance, a firm will be part of the ЕFМ program in November if:

  • This company processed no less than 1,000 e-commerce transactions in October;
  • Received at least $50,000 in fraud chargebacks in October.

Fraud chargebacks will include the following reason codes:

  • 4871: Chip/PIN Liability Shift
  • 4870: Chip Liability Shift
  • 4863: Cardholder does not Recognize – Potential Fraud
  • 4840: Fraudulent Processing of Transactions
  • 4837: No Cardholder Authorization
  • Has no less than 50 basis points 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% of its total card-not-present volume through 3DS and/or data-only

When will merchants be fined?

Mastercard decided to apply fines for merchants flagged in the program starting with March 2020.

SEE ALSO: How do Visa and Mastercard make money?

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