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.
 

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 tables:

Card Scheme

Name of program

Description/Further information

MasterCard

Excessive Chargeback Merchant (ECM)

Excessive Chargeback Merchant (ECM) is part of an update to the Excessive Chargeback Program (ECP), which monitors merchants that receive an excessive number of chargebacks on a monthly basis. Merchants will be evaluated under two categories—Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM). Going forward, Mastercard will automatically track chargebacks for all transactions, including e-commerce transactions, through network data, and notify acquirers when an individual merchant ID has breached the compliance threshold. ECM is intended to reduce chargebacks and strengthen the integrity of the Mastercard Network.

Criteria/Threshold

MasterCard

Merchants are considered noncompliant in the ECM category when both of the following are true in any month:

 

ECP

- The total number of first presentment chargebacks processed with Mastercard is between 100 and 299

- The total number of basis points from chargebacks processed with Mastercard is between 150-299

 

HECM

- The total number of first presentment chargebacks processed with Mastercard is more than 300

- The total number of basis points from chargebacks processed with Mastercard is more than 300

 

*Basis points are the number of chargebacks received by the acquirer for a merchant ID in a calendar month divided by the number of Mastercard transactions processed for the merchant ID in the preceding month, and then multiplied by 10,000

Number of Months Above ECP Thresholds

Assessment if ECM in Violation Month (100-299 Chargebacks and 150-299 Basis Points)

Assessment if High Excessive (HECM) in Violation Month Chargebacks and Greater than 300 Basis Points)

 

Violation Assessment

Violation Assessment

Issuer Recovery Assessment

1

2

3

4 to 6

7 to 11

12 to 18

19 +

0

EUR/USD 1,000

EUR/USD 1,000

EUR/USD 5,000

EUR/USD 25,000

EUR/USD50,000

EUR/USD100,000

 

0

USD 1,000

USD 2,000

USD 10,000

USD 50,000

USD100,000

USD200,000

 

No

No

No

Yes*

Yes*

Yes*

Yes*

 

* Issuer Recovery assessment applies at EUR/USD 5 per chargeback over 300 chargebacks. For example, a merchant with 500 chargebacks would be assessed EUR/USD 1,000 in Issuer Recovery (500-300 = 200 x EUR/USD 5 = EUR/USD 1,000)

Card Scheme

Name of program

Description/Further information

Criteria/Threshold

Scheme’s fee assessment/Penalty

MasterCard

Excessive Fraud Merchant (EFM)

The goal of the EFM program is to reduce fraud on electronic commerce (e-commerce) transactions, creating a more secure ecosystem and providing a better experience for cardholders. The EFM program will

measure compliance at the merchant ID level and send the notifications and potential financial assessments to their acquirer.

Mastercard identifies merchant activity at the merchant account level. If a merchant account meets the following conditions in a calendar month, they can be placed in the EFM program:

 

- At least 1,000 Mastercard sales transactions in the previous month
- At least $50,000 in Mastercard fraud chargebacks under reason codes:
4837 (No Cardholder Authorization)
4863 (Cardholder Does Not Recognize -- Potential Fraud)
- At least 0.50% fraud chargebacks-to-sales ratio
- Less than 10% of volume passing through 3D Secure in non-regulated countries or less than 50% of volume passing through 3D Secure in regulated countries

The following timeline applies to the monthly period that a user is part of a card monitoring program:

 

1 month - $0
2 month - $500
3 month - $1,000
4 to 6 month - $5,000
7 to 11 month - $25, 000
12 to 18 month - $50,000
19 + month - $100,000

*To be removed from the EFM program, a merchant must be in compliance for three consecutive months, meaning the account did not meet the listed criteria to be flagged in the program. Once a merchant exits the EFM program, any subsequent flagging would start over at Month 1 again.

Card Scheme

Name of program

Description/Further information

Criteria/Threshold

Scheme’s fee assessment/Penalty

Visa

VDMP

Visa’s Dispute Monitoring Program tracks the number of disputes (for all reason codes) the merchant receives in a given month and compares it to the number of sales transactions for that same month to calculate a disputes-to-sales count ratio.

A Merchant is placed in the Visa Dispute Monitoring Program (VDMP) 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 or more in dispute count and
- 0.9% or higher ratio of dispute count-to-sales count

Early Warning:
75 disputes or a dispute rate of 0.65%

* Different ratios and fees for Dispute Excessive monitoring Program and High Risk MCCs

The following timeline applies to the 12-month period that a user is part of a card monitoring program:

  • Months 1-4         Workout period
    -No fines
  • Months 5-9
    Visa fine of 50 USD / 45 EUR per dispute
  • Months 10-11
    Visa fine of 50 USD / 45 EUR per dispute        25,000 USD review fee (non-EU merchants only)
    May require audit
  • Month 12+
    Visa fine of 50 USD / 45 EUR per dispute
    25,000 USD review fee
    May require audit
    Merchant eligible for disqualification (i.e. can no longer process Visa payments)

Visa

VFMP

Visa’s Fraud Monitoring Program reviews transactions reported as fraud in a given month. Disputes can occur for other reasons (ex: Services Not Provided, Cancelled Recurring Transaction, Credit Not Processed, etc.) Under VFMP, Visa tracks the total dollar ($) amount of fraud related disputes in a given month and compares it to the amount of sales transactions for that same month to calculate a fraud-to-sales amount ratio.

A Merchant is placed in the Visa Fraud Monitoring Program (VFMP) 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:

- USD 75,000 or more in fraud amount and
- 0.9% or higher ratio of fraud dollar-to-sales dollar amount

Early Warning:
75 disputes or a dispute rate of 0.65%

* Different ratios and fees for Dispute Excessive monitoring Program and High Risk MCCs

 

Card Scheme

Name of program

Description/Further information

Criteria/Threshold

Scheme’s fee assessment/Penalty

American Express

American Express Excessive Chargeback fee

American Express' Excessive Chargeback Pricing Program is designed as a disincentive to poor customer service by merchants and encourage anti-fraud checks by them.

American Express may place merchants in any of these programs any time during the term of the Agreement:

  • Immediate Chargeback Program
  • Partial Immediate Chargeback Program
  • Fraud Full Recourse Program

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.

*Fee may vary as per American Express Program

 

 

 

Be advised that Schemes can assess fines once a merchant enters their monitoring programs and all these fines are assessed at the discretion of each Scheme. For more information please do not hesitate to contact us.