The Simility Blog

Mastercard’s New Fraud Monitoring Program: Another Reason to Invest in Adaptive Decisioning
Jayan Tharayil
September 25, 2019

Card fraud is a constant challenge for modern businesses. Any organization accepting card payments online is exposed to chargeback losses, customer churn, brand damage and the many other financial and reputational impacts of internet-based scams. Yet businesses not only have an obligation to themselves and their customers to tackle fraud, but also to card networks. That’s why each provider runs its own monitoring program, designed to help drive improvements in fraud prevention in as fair and transparent a way possible.  

A new program from Mastercard coming later this year should focus US merchants on the task in hand. Any businesses concerned at possible fines should consider investing in an advanced, machine learning-powered fraud prevention platform. 

What’s new? 

Mastercard’s new Excessive Fraud Merchant (EFM) Compliance Program will land in October 2019. Applicable only to US businesses, it will apply to any merchants which meet or exceed pre-defined thresholds for a short list of criteria. These are: 

  • A minimum of 1,000 e-commerce Mastercard payments 
  • Net fraud volume greater than $50,000 per month 
  • A fraud-count-to-transaction ratio (FCTR) that is greater than 0.50% 
  • Total 3D Secure (3DS) Mastercard transactions that amount to less than 10% of total Mastercard payment volume 

Net fraud volume is calculated according to the following chargeback 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 

Mastercard will start issuing fines from March 2020 to any merchant remaining in the program for two or more consecutive months. This starts at $500 after two months in the program, rising to $1000 for three months, $5000 for 4-6 months and $25,000 for 7-11 months.  

What does it mean for my business? 

Merchants should use these new rules as a springboard to drive improvements in their fraud prevention programs. Scammers are using increasingly sophisticated automated tools to anonymize their activity, evade traditional filters and industrialize the process of testing and using stolen identity data and credentials. Businesses must respond in kind. 

Simility’s Active Decisioning Platform offers highly effective and automated risk-based decisioning. Its data-centric model pulls structured and unstructured information from multiple sources, transforming and enriching it before applying manual rules backed by machine learning models. This brings together the best of human expertise and technology innovation. It allows risk experts to write rules in plain English within minutes and test them immediately, while machine learning algorithms step in to spot complex fraud patterns human eyes may miss, evolving over time as black hat techniques change. 

The escalation in global cyber fraud requires an industry-wide response. The card networks are doing their bit by providing a new impetus for business customers to reduce chargebacks and improve fraud screening. Now it’s time for the merchant community to step up. The good news is there are already cutting-edge tools on the market to support them in these efforts.  

To learn more about how Simility can help merchants fight fraud and adhere to Mastercard’s new compliance program, schedule a demo now.