What is the Mastercard Excessive Chargeback Monitoring Program (ECM)?Millions of Chargebacks Get Filed Each Year. Here’s How Mastercard Takes Action.
Mastercard Excessive Chargeback Merchant: What is This Program & How Do You Get Out of it?
Chargeback costs can extend far beyond the immediate loss of your revenue and merchandise. Mastercard, for example, can levy some heavy penalties on you if your monthly chargeback numbers are what they consider “excessive.”
The Mastercard Excessive Chargeback Merchant program, or ECM, can apply to any merchant who exceeds certain parameters regarding chargebacks received. That could mean more work, more fines, and more scrutiny.
What is the Mastercard ECM Program?
- Excessive Chargeback Merchant
The Excessive Chargeback Merchant program is a dispute compliance scheme created by Mastercard. The program's purpose is to exercise oversight regarding eCommerce merchants and prevent too many chargebacks from occurring on the Mastercard network. This is achieved by imposing penalties on merchants for noncompliance.
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The Excessive Chargeback Merchant program is a dispute compliance scheme created by Mastercard. The aim here is to prevent too many chargebacks from occurring on the Mastercard network by setting a standard chargeback-to-transaction ratio threshold, and imposing penalties on non-compliant merchants.
Mastercard uses network data to track chargebacks for all transactions, both card-present and card-not-present. The network then notifies acquirers whenever an individual merchant ID breaches the compliance threshold.
Mastercard calculates your chargeback rate by a simple formula: the current month’s first chargebacks divided by the total number of transactions in the prior month. This is based on your individual merchant ID, or MID. The Excessive Chargeback Merchant designation is applied to individual MIDs receiving an excessive number of monthly chargebacks on Mastercard-branded cards.
How Does the ECM Track Chargebacks?
Mastercard calculates your chargeback rate by a simple formula: the current month’s first chargebacks divided by the total number of transactions in the prior month. This is based on your individual merchant ID, or MID. The Excessive Chargeback Merchant designation is applied to individual MIDs receiving an excessive number of monthly chargebacks on Mastercard-branded cards.
Mastercard uses network data to track chargebacks for all transactions, both card-present and card-not-present. The network then notifies acquirers whenever an individual merchant ID breaches the compliance threshold.
Why Did Mastercard Create the ECM Program?
Mastercard understands that identifying and preventing all chargebacks is an unrealistic goal. Fraudsters are always looking for ways to slip through a merchant’s defenses. Plus, mistakes happen from time to time, and merchants can make errors that lead to chargebacks. Then there’s friendly fraud, which is outside of your control for the most part.
All that said, Mastercard still wants the minimum possible number of claims occurring on their network. Their reputation is tied to the security and stability of card payments. Over time, runaway chargeback activity could potentially destroy consumer confidence and destabilize the entire payments industry.
The Mastercard Excessive Chargeback Merchant compliance label is not meant to punish merchants. It’s simply a way to exert negative reinforcement, motivating merchants to keep chargebacks under control. It also helps identify and remove bad actors from the Mastercard ecosystem.
The ECM serves as a counterpart to the Mastercard Excessive Fraud Merchant (EFM) program, which we’ll talk about in the next chapter.
