Chargeback Rate Change

May 11, 2020

Managing approval rates with fraud and chargebacks can be a tricky balancing act for businesses. The Visa Fraud Monitoring Program (VFMP) has updated their chargeback rate threshold from 1% down to 0.9%. This is definitely a point to be aware of if your business is on the verge of exceeding those limits. Changes to the Visa Dispute* and Fraud Monitoring Programs arrived October 1, 2019. These changes are placing more responsibility on merchants to manage their chargeback prevention strategies.

By accepting Visa cards at point-of-sale, merchants hold the responsibility for controlling and preventing their own fraud incidents. Objectives of the program are to identify and remediate merchants that generate excessive dispute activity. Visa alerts businesses that have met or exceeded these program thresholds for excessive disputes on a monthly basis.

Here is a breakdown of the changes that merchants should keep top of mind.

Updated Visa Program Thresholds as of October 2019:

Visa Fraud Monitoring Program (VFMP) Current Threshold criteria as of October 1
Early Warning 0.75% of sales and $50,000 0.65% of sales and $50,000
Standard Program $75,000 in fraudulent transactions and 1.0% fraud: sales ratio (dollars) $75,000 in fraudulent transactions and 0.9% fraud: sales ratio (dollars)
Excessive Program $250,000 in fraudulent transactions and 2.0% fraud: sales ration (dollars) $250,000 in fraudulent transactions and 1.8% fraud: sales ratio (dollars)
Visa Dispute Monitoring Program (VDMP) Current Threshold criteria as of October 1
Early Warning 0.75% of sales and $50,000 0.65% of sales and $50,000
Standard Program 100+ dispute count and 1.0% dispute: sales ratio 100+ dispute count and 0.9% dispute: sales ratio
High-Risk Program 1,000+ dispute count and 2.0% dispute: sales ratio 1,000+ dispute count and 1.8% dispute: sales ratio

What do Visa’s Thresholds Mean for Businesses?

Visa’s stricter thresholds mean merchants need to keep a closer eye on their margin of error when it comes to risk outcomes.

Early warning notifications provide acquirers and merchants an opportunity to reduce fraud and/or dispute levels before a merchant is identified in VFMP and/or VDMP. Merchants placed in the chargeback monitoring program generally have three months to address their chargeback rates, or at least present a plan for doing so. Once a plan is created, they may have a compliance window of three to six months. However, the worse-case scenario? Visa could eliminate a merchant’s account and they would no longer be able to accept Visa payments.

Merchants should take steps now to make sure they maintain adequate chargeback controls in order to stay below program thresholds.

How Kount Helps Business Avoid Dispute Thresholds

Businesses dread receiving letters from Visa saying they are in danger of exceeding dispute thresholds and facing the financial impacts that come with them. Many ask how they can solve this problem right away.

They need a solution that delivers fast and immediate results. Kount Complete™ helps businesses achieve a rapid resolution to Visa dispute thresholds. Kount Complete protects against digital payments fraud, allowing merchants to achieve the right outcomes around chargeback and decline rates, as well as operational costs.

Friendly fraud is often tied to criminal fraud. For businesses that have been aggressive at managing criminal fraud, it is estimated that the remaining fraud is typically 70% friendly fraud, 20% criminal fraud and 10% legitimate disputes. It’s important to note that not all chargebacks have a criminal element. Some chargebacks are based on valid and authentic customer concerns and can signal errors in a business process that need resolution.

With Kount’s solution, businesses can learn to distinguish between the two and put the right fix in place, including Kount’s Visa Merchant Purchase Inquiry solution.

Kount helps businesses solve the problem of excessive disputes, both criminal and friendly, with advanced AI. Running dynamic supervised and unsupervised machine learning in parallel, Kount’s AI quickly detects anomalies, provides link analysis, and automatically evaluates and weighs features to quickly identify different types of fraud.

Trained to recognize patterns that have not been seen before, it detects complex and automated fraud in milliseconds. Kount’s AI produces Omniscore, an actionable fraud payments score that simulates the judgment of an experienced fraud analyst.

A robust and comprehensive fraud prevention solution that accurately detects new and emerging fraud trends can help reduce or eliminate chargebacks from criminal and friendly fraud and the associated loss of income.

Learn how Kount can protect your business from disputes.

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