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Merchant Monitoring Program

The major card schemes all impose additional fee assessments for merchants with excessive chargebacks/disputes. They do this because "trust" in their brand by cardholders is vital to the continued success of their brands.

CashFlows strongly recommend all merchants read the following guides which are available online:

CashFlows Merchant Monitoring Program

CashFlows Merchant Monitoring Program is designed minimise the risk of an ultimate fee assessment or termination of merchants that have high levels of chargebacks/disputes. The program involves training and proactive input from CashFlows to improve the merchant's chargeback/dispute rate. This program is not guaranteed to prevent a breach of a card scheme threshold but it is our hope that it will help the merchant in improving their chargeback levels so as to hopefully avoid such a breach.

A merchant will be placed on the CashFlows Merchant Monitoring Program if their monthly performance activity levels are viewed as having the potential to breach the card scheme thresholds below:

CashFlows reserve the right to re-securitise where we feel we are under-securitised and to terminate to project a breach of the card scheme's thresholds. We may also to prevent a breach of threshold enforce that all 'High Risk Warnings' ('TC40'/'SAFE Fraud alerts) are refunded upon receipt unless they have already been refunded or charged back.

Card scheme fee assessments

If a merchant is receiving a large percentage of disputed transactions or chargebacks they are required to take corrective actions to prevent disputes arising, or they may face card scheme fee assessments as per the following table:

CARD
SCHEME
NAME OF PROGRAM DESCRIPTION/ FURTHER INFORMATION CRITERIA/THRESHOLD FEE ASSESSMENT/ PENALTY
VISA Visa Chargeback Monitoring Programme (VCMP) The Visa Chargeback Monitoring Programme monitors domestic and International transactions in Germany and the United Kingdom. In all other countries the Visa Chargeback Monitoring Programme monitors only International transactions (issuer country not equal to merchant country). A Merchant is placed in the Visa Chargeback Monitoring Programme (VCMP) if any of its Merchant Outlets meets or exceeds all of the following monthly performance activity levels for International Transactions and Country-to-Country Transactions:
- 100 Chargebacks; and
- One percent (1%) ratio of Chargebacks to Sale Transactions
US $100 per Chargeback
Mastercard Chargeback-Monitored Merchant (CMM) Mastercard designed the Excessive Chargeback Program (ECP) to encourage each Acquirer to closely monitor, on an ongoing basis, its chargeback performance at the Merchant level and to determine promptly when a Merchant has exceeded or is likely to exceed monthly chargeback thresholds. A Merchant is defined as any distinct merchant location, whether a Merchant's physical location or a Merchant's Internet site or Uniform Resource Locator (URL) that is uniquely identified by the acquirer in the transaction record. The first stage is the Chargeback Monitored Merchant (CMM) The thresholds for this program are:
- CTR = this month chargebacks /last month sales
- where the Chargeback to Sales Ratio (CTR) is in excess of
100 basis points (1.00%) AND
-at least 100 chargebacks in a calendar month
US $50 Monthly Reporting Fee
Mastercard Excessive Chargeback Program (ECP) Mastercard designed the Excessive Chargeback Program (ECP) to encourage each acquirer to closely monitor, on an ongoing basis, its chargeback performance at the merchant level and to determine promptly when a merchant has exceeded or is likely to exceed monthly chargeback thresholds. A merchant is defined as any distinct merchant location, whether a merchant's physical location or a merchant's Internet site or Uniform Resource Locator (URL) that is uniquely identified by the Acquirer in the Transaction record. The first stage is the Chargeback Monitored Merchant (CMM) A merchant is an Excessive Chargeback Merchant if in each of two consecutive calendar months (the "trigger months") the merchant has a minimum chargeback to sales ratio (CTR) of 150 basis points (1.5%) and at least 100 chargebacks in each month. A reporting fee of $300 will be assessed for each month a report is submitted. Issuer Re-Imbursement is $25 for every chargeback that falls outside the 1% number Additionally, for each month that the ECP is exceeded, Issuer Re-Imbursements and Violation Assessments are calculated. Violation Assessment is the Issuer Re-Imbursement multiply by the CTR
Mastercard The Global Merchant Audit Program (GMAP) The Global Merchant Audit Program (GMAP) uses a rolling six months of data to identify Merchant locations that, in any calendar month, meet the criteria listed in the criteria column under each tier. If a Merchant location is identified in multiple tiers during any rolling six-month period, GMAP will use the highest tier for the Merchant identification. If a Merchant has more than one location (or outlet), the program criteria apply to each location independently. Tier 1 - Informational Fraud Alert:
- Three (3) fraudulent Transactions
- At least USD 3,000 in fraudulent Transactions
- A fraud-to-sales dollar volume ratio minimum of 3% and not exceeding 4.99%
Tier 2 - Suggested Training Fraud Alert:
- Four (4) fraudulent Transactions
- At least USD 4,000 in fraudulent Transactions
- A fraud-to-sales dollar volume ratio minimum of 5% and not exceeding 7.99%
Tier 3 - High Fraud Alert:
- Five (5) fraudulent Transactions
- At least USD 5,000 in fraudulent Transactions
- A fraud-to-sales dollar volume ratio minimum of 8%
On a "High Fraud Alert" (Tier 3)- Immediate Termination of Facility and removal of merchant's right to dispute all fraud related Chargebacks / Disputes for a minimum of one year;
Mastercard Mastercard MO/TO (Mail Order /Telephone Order) Programme Mastercard's MO/TO Program (ECSMP) has a tiered approach and identifies merchants that have exceeded either of the following excessive FRAUD transaction standards within a six-month period In any calendar month:
- 3 fraudulent MOTO/Internet chargebacks/disputes, or;
- $20,000 in total Fraud chargebacks/disputes or;
- FRAUD chargeback-to-sale count or value ratio rate of 1% or higher
The mandating of CVV and/or 3DS on all transactions or termination of the facility;
American Express Excessive Chargeback Pricing American Express' Excessive Chargeback Pricing Program is designed as a disincentive to poor customer service by merchants and encourage anti-fraud checks by them Merchant has a total chargeback-to-sale count or value ratio rate of 1% or higher. A charge equivalent to 5% of the value of all Sales processed in the month of breach

 

Mastercard ECP calculation

ECP Assessment Calculation. Mastercard determines a merchant's liability for the monthly issuer reimbursement fees and assessments for each ECM as set forth below.

  1. Calculate the CTR for each calendar month that the ECM exceeded a CTR of 150 basis points (which may also be expressed as 1.5% or 0.015).
  2. From the total number of chargebacks in the above CTR calculation, subtract the number of chargebacks that account for the first 150 basis points of the CTR. (This amount is equivalent to 1.5% of the number of monthly sales transactions used to calculate the CTR.) The result is the number of chargebacks above the threshold of 150 basis points.
  3. Multiply the result from step 2 by $25. This is the issuer reimbursement.
  4. Adjust the result in step 3 to reflect the extent that the acquirer has exceeded the 150 basis points threshold by multiplying the value in step 3 by the CTR (expressed as basis points). Divide this result by 100. This amount is the violation assessment.

Repeat steps 1-4 for each calendar month that the ECM exceeded a CTR of 150 basis points or 1.5%.

Example: The acquirer for merchant ABC acquired Mastercard sales transactions and chargebacks over a six-month period as follows:

MONTH JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY
Sales Transaction 95,665 95,460 95,561 95,867 95,255 95,889 95,758
Chargebacks 1,050 1,467 1,635 1,556 1,495 1,052 985
CTR in basis points - 153 171 163 156 110 103


In the example above, February and March are the trigger months, as these are two consecutive months where the CTR exceeded 150 basis points. At the end of July, merchant ABC was no longer an ECM as its CTR was below 150 basis points for two consecutive months. Mastercard calculates assessments and issuer reimbursements for each ECM month (February through July). The assessment for April, (using March sales transactions and April chargeback volumes) is calculated as follows:

  • The CTR = April chargebacks / March sales transactions = 1,556 / 95,561 = 0.01628 or 163 basis points (rounded).
  • The number of chargeback in excess of the 150 basis points is determined by subtracting 1.5% of the March sales transactions from the number of April chargeback. 1.5% of the March sales transactions [95,561 x 0.01] is 956. 1,556-1,433 = 123 chargeback.
  • The issuer reimbursement for April is 123 x $25 = $3,075.
  • The violation assessment is ($3,075 x 163) / 100 or 501,225 / 100 = $5,012.25.

Using this methodology for each ECM month, the issuer reimbursement fees and assessments for the acquirer for merchant ABC are as follows:

MONTH ISSUER REIMBURSEMENT ASSESSMENT TOTAL
February (first trigger month) 0 0 0
March (second trigger month) $5,075.00 $8,678.25 $13,753.25
April $3,075.00 $5,012.25 $8,087.25
May $1,425.00 $2,223.00 $3,648.00
June 0 0 0
July 0 0 0
Total $9,575.00 $15,913.50 $25,488.50