As Visa Lowers its Chargeback Ratios Merchants Need More Effective Fraud Management

Fraud prevention is an increasingly important part of running a modern business. If you accept online card payments, the chances are your organization will be exposed to digital scams. The cost of fraud can extend well beyond lost sales to customer attrition, reputational damage, and regulatory and administrative fines.

New rules from Visa set to land later this year will put an even greater focus on fraud prevention. Why? Because they’ll lower key thresholds for its chargeback and fraud monitoring programs — putting some merchants at risk of higher fines, admin charges and possibly even merchant account closure.

Playing By The Rules

As a merchant, there are various rules you need to follow to benefit from accepting card payments. These are created to enforce best practices, minimize risk and ensure businesses are running secure, PCI-compliant systems, therefore instilling confidence in the payments experience.

Two key initiatives run by Visa are its Chargeback Monitoring Program (VCMP) and Fraud Monitoring Program (VFMP). As a merchant, you want to avoid being placed on these as they will require extra admin in the form of filling out a VCMP/VFMP Remediation Plan with the acquirer, and taking subsequent steps to reduce fraud/chargebacks. There could be additional fees added to your merchant service agreement with the acquirer while you’re in the program, and even the possibility your merchant account will be closed if you remain there for several months.

What’s New?

The bad news is that Visa is reportedly lowering the thresholds needed to qualify for these programs, effective from October 1, 2019:

VCMP: Previously, lower-risk merchants were put in the program if they had 100+ disputed transactions per month and a dispute-to-transactions ratio of 1%. From October, the ratio will be lowered to 0.9%. For higher-risk merchants, the dispute-to-transactions ratio will come down from 2% to 1.8%, plus 1,000+ disputed transactions monthly.

VFMP: Low-risk firms used to be placed on the program if they processed $75,000+ in fraudulent transactions per month and had a fraud-to-sales volume ratio of 1%. The new rules will keep the $75,000 threshold but reduce the ratio to 0.9%. For high-risk merchants with $250,000+ fraudulent sales per month, the ratio will drop from 2% to 1.8%.

What Does This Mean For Me?

The newly lowered ratios could make it easier for your firm to slip onto one of the programs unless chargeback and fraud levels are closely monitored and managed. Visa is making the changes because fraud is becoming increasingly sophisticated and it feels businesses need a push to start taking defensive measures.

Global scammers today have access to huge volumes of breached identity data, dark web techniques and tools like automated credential stuffing bots to carry out account takeovers, transaction fraud, account creation scams and much more. Some even use omnichannel techniques to circumvent online fraud checks.1

Stopping this kind of activity without adding extra friction to the customer journey can be challenging. That’s why merchants need to look at advanced data-driven solutions which combine large volumes of internal and third-party data and apply machine learning intelligence to empower fraud teams. This kind of automated, risk-based decisioning will help them maintain a great customer experience while minimizing fraud and any resulting chargebacks.

Visa is understandably unwilling to accept as much risk as it once did, and that means your business must follow suit. Proactively seeking out next-generation fraud prevention now could save a great deal of time and money down the line, as well as helping to protect your brand reputation and customer loyalty.

To learn more about how Simility can help merchants lower chargebacks to meet Visa’s new rules, schedule a demo now. 


1 Simility, https://simility.com/blog/omnichannel-holiday-retail-fraud

Arthi Rajan

Arthi Rajan

Arthi Rajan, Engineering & Product leader in the Risk Platform team at PayPal, has built a brand over 12 years at PayPal as a fearless leader with a passion for building and leading high performing global teams and cutting edge platform adoption. Her team builds innovative risk experiences that utilize the strengths of PayPal in machine learning in a unique ecosystem of a 2 sided global network. These solutions and experiences span across consumer, seller fraud and credit underwriting challenges. She and her team thrive on solving complex business problems and enabling world class customer experiences using the intersection of technology and data.
Arthi Rajan