Visa’s Chargeback Monitoring Program

chargeback-monitoring

Understanding Visa Chargeback Thresholds

Visa carefully monitors each merchant and takes action when activities may cause undue harm to the goodwill of the Visa system. One issue that regularly threatens Visa’s brand is excessive chargeback levels.

The network’s Chargeback Monitoring Programs help acquirers identify merchants who have exceeded the Visa chargeback thresholds. Acquirers are expected to help merchants in the Chargeback Monitoring Programs reduce chargebacks, assess fraud controls, review the operating environment, and more.

Most importantly, merchants need to establish a detailed chargeback management system which accurately identifies the chargeback triggers and outlines applicable prevention strategies.

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Unusual Activity Reports

Visa requires acquirers to submit unusual activity reports in certain situations. These reports are the first clue that chargeback risks might be elevating.

Acquirers must create and submit an unusual activity reports if either of the following happens:

  • Currently weekly gross sales volume is $5,000 or more. Also, the number of transaction deposits, gross amount of deposits, average transaction amount, or number of chargebacks exceeds 150% of normal weekly activity.
  • More than 15 days passes between the transaction date and the processing date.

For high-brand risk merchants, this information must be reviewed daily and unusual activity reports must be filed within two business days if suspicious events occur.

Chargeback Monitoring Programs

The Chargeback Monitoring Programs analyze merchant activity when chargeback thresholds have been breached. To calculate the thresholds, Visa uses a chargeback-to-transaction ratio.

To calculate the chargeback ratio, Visa tallies the current month’s chargebacks and divides the number by the current month’s Visa transactions. For example, 100 chargebacks issued in June would be divided by 10,000 transactions in June to produce a chargeback-to-transaction ratio of 1%.

visa_excessive_chargeback_levels

Visa’s Chargeback Monitoring Program involves three categories.

Global Merchant Chargeback Monitoring Program (GMCMP)

The Global Merchant Chargeback Monitoring Program is designed to encourage global merchants to reduce chargebacks and implement best practices.

Category Number of Chargebacks Number of Transactions Chargeback Ratio
Global Merchant Chargeback Monitoring Program At least 200 international chargebacks At least 200 international transactions 2% ratio of international chargebacks to international transactions within the same month

The Global Merchant Chargeback Monitoring Program includes a workout period. This allows merchants an opportunity to get chargebacks under control before becoming fee eligible. However, Visa reserves the right to withdraw this workout period if the network feels the merchant’s activities cause undue harm to Visa’s brand.

If the merchant changes acquirers while involved with the Global Merchant Chargeback Monitoring Program, the same status will apply with the new acquirer.

Visa has different thresholds depending upon where the acquiring bank is geographically located. It’s important to know where the acquiring bank is located to understand the exact limitations.

There are two categories for thresholds to consider in these calculations: the above illustrates the limits for international banks and the below shows the limits for domestic banks.

Visa has different thresholds depending upon where the acquiring bank is geographically located. Banks located in the U.S. have more stringent requirements and lower thresholds. It’s important to know where the acquiring bank is located for your merchant account in order to understand the exact limitations.

U.S. Merchant Chargeback Monitoring Program (MCMP)

All U.S. merchants are eligible for The Merchant Chargeback Monitoring Program.

Category Number of Chargebacks Number of Transactions Number of Basis Points
U.S. Merchant Chargeback Monitoring Program At least 100 chargebacks At least 100 transactions At least 100 basis points (1% chargeback ratio)

The acquirer will receive notification that its merchant has entered the Merchant Chargeback Monitoring Program. Within 10 calendar days, the acquirer must notify the merchant.

If a merchant moves to the U.S. region while involved with a different chargeback monitoring program, it will be added to the equivalent category in the U.S.

High Brand Risk Chargeback Monitoring Program (HBRCMP)

The High Brand Risk Chargeback Monitoring Program was designed to help high-risk merchants keep chargeback thresholds in check.

Involvement in this program applies to all high-risk merchants who meet or exceed Visa chargeback thresholds.

Category Number of Chargebacks Number of Transactions Number of Basis Points
High Brand Risk Chargeback Monitoring Program At least 100 chargebacks At least 100 transactions At least 100 basis (1% chargeback ratio)

The acquirer will receive notification that its merchant has entered the High Brand Risk Merchant Chargeback Monitoring Program. Within 15 calendar days, the acquirer must notify the merchant.

The High Brand Risk Chargeback Monitoring Program applies to all merchants deemed high-risk based on their merchant category code (MCC). However, merchants who would not otherwise be deemed high risk can be promoted from the Merchant Chargeback Monitoring Program to this category if chargebacks become excessive.

Visa’s Fraud Thresholds

In addition to chargeback thresholds, Visa also has fraud thresholds. If merchants breach these predetermined levels, fees and punishments will be enforced.

Visa’s Merchant Fraud Programs
Domestic Merchant Fraud Performance Program
  • At least $10,000 in reported fraud
  • 1% or greater fraud-to-sales ratio
Interregional
  • At least 25 reported fraudulent transactions
  • At least $25,000 in reported fraud
  • 2.5% or greater fraud-to-sales ratio
Interregional (Excessive)
  • At least $250,000 reported fraud
  • 2.5% or greater fraud-to-sales ratio

Just like excessive chargeback levels, the acquirer can terminate a merchant account because of disproportionate fraud activity.

Need Help Writing Your Mitigation Plan?

Processors and networks take various steps to help merchants manage chargebacks before and after thresholds have been breached.

If the processor believes the merchant is receiving too many chargebacks, a Mitigation Plan might be required. A Mitigation Plan outlines the merchant’s strategy for reducing risk and managing chargebacks. Visa will also require a Mitigation Plan once the merchant enters a chargeback monitoring program.

warnIf you’ve reached the point where a Mitigation Plan is required, your business is in grave danger. Visa might allow you to attempt your management strategy or the network could simply revoke your acceptance privileges. Your Mitigation Plan could make or break your business; it isn’t a task to be taken lightly.

Chargebacks911™ can prepare a strategic, actionable Mitigation Plan and help you take the necessary steps to reduce chargeback rates. We provide the leading chargeback management services because our expertise and personal approach to routine procedures makes our efforts more successful than any other provider. Let us help.

Merchant Disqualification

Merchants who fail to properly manage chargebacks or reduce the risk of transaction disputes may be permanently removed from the Visa program. This can happen if merchants are involved in one of Visa’s Chargeback Monitoring Programs for too long.

However, banishment can also happen without involvement in a Chargeback Monitoring Program. Visa may require the acquirer to discontinue the merchant agreement if a merchant reaches a critical chargeback level during any given month.

Reputation Management

Carefully monitoring chargeback rates can help merchants determine chargeback triggers and implement appropriate prevention tactics. However, effective chargeback management demands a lot of valuable resources. Many merchants struggle to stay one step ahead of the situation.

Involvement in Visa’s Chargeback Monitoring Program helps keep merchants accountable when they might otherwise be tempted to brush the situation off as unimportant.

While it might seem like chargeback rates were established to help merchants implement best practices, these thresholds really serve as a reputation guard dog.

If the reputation of Visa or the acquirer could be tarnish by a merchant’s actions, it is in these parties’ best interests to terminate services to a potentially damaging merchant.

Chargeback management becomes an absolutely essential task when a business’s longevity is at risk. However, using the wrong approach can cause even more trouble, increasing a merchant’s risk and the likelihood of additional profit losses.

Chargebacks911™ can help detect friendly fraud, reduce risk, and prevent chargebacks. If you’d like more information about our turnkey solutions and how they can help your individual business, let us know.

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Chargeback thresholds current as of April 15, 2015; Visa Core Rules and Visa Product and Services Rules

Jun 24, 2015   2448   cb911    Regulations & Guidelines    
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