What is the Visa Fraud Monitoring Program?

If your fraud-to-sales ratio exceeds specific thresholds, the card scheme will place you on the Visa Fraud Monitoring Program

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Alexia Le Tarnec
March 5, 2024
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What is the Visa Fraud Monitoring Program?

As part of its efforts to protect the integrity of the global payment system, Visa, like Mastercard, continually monitors the reported fraud activity of its merchants.

If your fraud-to-sales ratio exceeds specific thresholds, the card scheme will place you on the Visa Fraud Monitoring Program, which starts to levy fines if you are unable to bring your fraud activity back down to an acceptable level. 

However, these fines aren’t imposed immediately and vary depending on how severe your fraud problem is. In this article, we explain how the VFMP works, the consequences of being on the program, the different thresholds and fines, and how to exit the program after you’ve been placed on it. 

What are Visa Monitoring Programs?

Visa has two distinct programs that have both been designed to incentivize merchants to get excessively high disputes or fraud rates under control, the Visa Fraud Monitoring Program (VFMP) and the Visa Dispute Monitoring Program (VDMP). Both impose strict measures, including fines, if merchants fail to tackle their disputes or fraud rates within a certain time frame. 

The VDMP targets merchants if their chargeback ratio passes particular thresholds. At the early stage threshold, you, the merchant, are advised to take action to limit your disputes. At the standard stage (100 disputes and 0.90% dispute-to-sales ratio), Visa gives you four months to bring your disputes down before it starts imposing fines starting from $50 per dispute in month five. At the excessive level (1000 disputes and 1.80% dispute-to-sales ratio), fines are imposed immediately and you’ll continue to be charged for every dispute until you can bring your disputes back to below the standard threshold. 

What is the Visa Fraud Monitoring Program?

The VFMP is an initiative that identifies merchants with excessively high levels of fraud and requires them to take action to reduce fraud activity within a certain timeframe. If the merchant is unable to comply, they face being fined and, ultimately, expelled from Visa.  

What are the consequences of entering the VFMP?

The consequences of entering the VFMP depend upon which threshold you surpass. Visa doesn’t impose fines immediately if your total fraud value is below $250,000 and your fraud-to-sales ratio is below 1.80%. If you exceed this, however, or if you are unable to tackle the issue within four months, you could face serious fines. More on this below. 

What are the risk thresholds?

The VFDP has three risk thresholds: early warning, standard, and excessive, which are based on your fraud-to-sales ratio within any given month. 

The key difference between the VFDP and the VDMP is that, for the former, Visa uses the dollar value of fraudulent transactions compared to your legitimate transactions rather than just the total number of transactions. 

The thresholds are:

  • Early warning - a total fraud value of $50,000 and a fraud-to-sales ratio of 0.65%
  • Standard - a total fraud value of $75,000 and a fraud-to-sales ratio of 0.90%
  • Excessive - a total fraud value of $250,000 and a fraud-to-sales ratio of 1.80%

What fines may merchants face under the VFMP?

At the early warning threshold, Visa will merely notify you that you need to bring your fraud rate down. However, things become substantially more serious on the standard and excessive thresholds. 

Standard threshold

If you pass the standard threshold, you won’t be hit with fines immediately. But if you fail to bring your fraud-to-sales ratio down within four months, Visa will start to impose fines, which escalate according to the following timeline: 

  • Months 5 - 6: $25,000 and 10.5 Dispute Liability (this code is applied when Visa informs the issuer about a transaction flagged by the VFMP that has not been successfully contested under a different reason code)
  • Months 7 - 9: $50,000 and 10.5 Dispute Liability
  • Months 10 - 11: $75,000 and 10.5 Dispute Liability
  • 12 months+: $75,000 and 10.5 Dispute Liability

From month five, your business will also become liable for reason code 10.5 chargebacks, which make it easier for card issuers to recover their fraud losses in cases where you, as the merchant, should have prevented them. 

After the start of month 12, you also become eligible for disqualification from Visa, meaning you will no longer be able to process Visa payments. 

Excessive threshold

If you surpass the excessive threshold, Visa will impose fines from day one, which escalate as follows: 

  • Months 1 - 3: £10,000 and 10.5 Dispute Liability
  • Months 5 - 6: $25,000 and 10.5 Dispute Liability
  • Months 7 - 9: $50,000 and 10.5 Dispute Liability
  • Months 10 - 11: $75,000 and 10.5 Dispute Liability
  • 12 months+: $75,000 and 10.5 Dispute Liability

Visa can also decide to place you in the excessive timeline if you don’t show enough evidence that you’re making progress to tackle fraud on the standard timeline. Note that even if you manage to reduce your fraud-to-sales ratio below the excessive threshold, you will remain on the excessive timeline until you fully exit the program (rather than dropping down to the standard). 

High Risk

If your business is categorized as high risk - which means it operates in, for example, the direct marketing, adult, or gambling industries - Visa will place you on the high-risk timeline, which incurs the same fines on the same schedule as the excessive threshold timeline.  

How to exit the VFMP

There’s only one way to exit the VFMP: you must remain below the standard threshold fraud-to-sales ratio of 0.9% for three consecutive months. If at any point you go over the threshold during those three months, you will continue to be identified with the timeline you were on previously, and the three-month period will start again the next time you drop below the standard threshold. 

During this time, you will also be required to submit a mediation plan detailing the actions that you’re taking to tackle your fraud problem. This mediation plan should be created in partnership with your acquiring bank and must:

  • State the root causes for your inclusion in the VFMP
  • Explain what actions you are taking to reduce your fraud levels
  • Agree on milestones with Visa to achieve those actions by  

If your mediation plan meets all the above criteria, your acquirer may be able to persuade Visa to waive the non-compliance fines in whole or in part. However, be aware that those fees will continue to accrue, and if you’re unable to achieve the agreed-upon milestone for taking corrective action, Visa could request that you pay the accrued fines in full. 

To keep your fraud rates down, you should consider Visa Compelling Evidence 3. which brings a set of guidelines and tools to merchants and financial institutions to help them dispute and resolve chargebacks more effectively, particularly those related to fraud.

Other safety products like 3Ds that verify the cardholders’ identity in real-time, reducing the risk of unauthorized transactions, and Fraud Detection Pro, which leverages advanced algorithms and machine learning to analyze transaction patterns, protect merchants from chargebacks, and maintain low fraud rates.

How to avoid enrolment in the VFMP

An even better strategy for exiting the VFMP is to avoid ever being placed on the program in the first place. To do that, you need to implement tools and strategies that actively reduce your fraud rate, including fraud detection and prevention measures that use algorithms to identify suspicious activity and block it before these harmful transactions are processed. That means they don’t count towards your fraud-to-sales ratio, and you’ll stay comfortably below the VFMP thresholds. 

Machine learning-based tools have the capacity to analyze thousands of data points and can work round the clock to protect your business. However, you should also train your staff to be vigilant about suspicious transactions and customer behaviors as an extra line of defense. 

How to combat fraud with Checkout.com

Keen to avoid being placed on the VFMP? Checkout.com has all the tools you need to keep your fraud rate down, including sophisticated detection and prevention tools that can analyze transactions in real time. What’s more, customizable rules give you the power to define your risk appetite and tailor our fraud-fighting solution to the specific risks your business faces, all while increasing acceptance of legitimate transactions. 

Fraud detection is built into the Checkout.com platform protecting your business and reducing false positives. You can create flexible rules and approve and deny lists to stop fraud while ensuring legitimate transactions are authorized. If a transaction passes the fraud rules or is considered medium risk, 3DS can then provide an additional verification step, directly involving the cardholder in the authentication process.

Speak to a member of our sales team to find out more.

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March 5, 2024 16:05
March 5, 2024 16:05