What is the Mastercard Excessive Fraud Monitoring Program (EFM)?Keep Fraud Incidents in Check to Avoid the EFM & Reduce Your Mastercard Fees
Mastercard Excessive Fraud Merchant: What is This Program & How Do You Get Out of it?
The size and complexity of Mastercard’s global card network is difficult to understate. There are more than 3.4 billion Mastercard-branded debit, credit, and prepaid cards in circulation worldwide. The Mastercard network itself handles 197 billion transactions per year at a maximum throughput of 5,000 transactions per second.
The sheer scale of this operation means that some volume of fraud is inevitable.
While any network can cope with a certain level of bad behavior, an excessive amount of illicit activity can quickly undermine the stability of the ecosystem and the trust its participants have in the network. That’s where the Mastercard Excessive Fraud Monitoring (or “EFM”) program comes into effect.
What is the Excessive Fraud Merchant Program?
- Excessive Fraud Merchant
The Mastercard Excessive Fraud Merchant program is a fraud compliance scheme created by the card network. The program's purpose is to exercise oversight regarding eCommerce merchant activity and prevent excessive fraud from occurring on the Mastercard network. This is achieved by imposing penalties on merchants for noncompliance.
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The Mastercard Excessive Fraud Merchant program is a fraud compliance scheme created by the card network. The program's purpose is to exercise oversight regarding eCommerce merchant activity and prevent excessive fraud from occurring on the Mastercard network.
The basic point of the EFM program is to stop fraud instances resulting from eCommerce transactions. Mastercard explains that this program creates “a more secure ecosystem and provides a better experience for cardholders.”
How Does the EFM Track Fraud?
Mastercard calculates your fraud rate using a simple formula: taking the total number of transactions in the prior month and dividing it by the current month’s qualifying disputes. “Qualifying” disputes are any chargebacks you get that are tied to a card-not-present, eCommerce transaction filed using reason code 4837 (“No Cardholder Authorization”)
This is based on your individual merchant ID, or MID. The Excessive Fraud 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 is Mastercard Doing This?
As we mentioned in the last chapter, the EFM is a counterpart program to the Mastercard chargeback monitoring program (ECM). Both are part of the North America Assurance Framework.
The basic point of the Mastercard fraud monitoring program is to stop fraud instances resulting from eCommerce transactions. Mastercard explains that this program creates “a more secure ecosystem and provides a better experience for cardholders.”
Yes. It is possible to be placed in both the ECM and the EFM program simultaneously. Under these circumstances, however, only the EFM program fees apply.
Card networks like Mastercard acknowledge that identifying and preventing all fraudulent activity is unrealistic for most merchants. Mistakes can happen. A bad actor might slip through merchants’ defenses from time to time.
But, while preventing 100% of fraud may be unrealistic, the company still wants to minimize the number of incidents that occur on its network. Their reputation is tied to the security and stability of card payments. Thus, allowing uncontrolled fraud on their network could damage their reputation. It could shake consumer confidence in payment card security over time.
The Mastercard Excessive Fraud Merchant program isn’t designed to punish merchants for incidents outside of their control. Rather, the EFM program is meant to provide negative reinforcement to motivate merchants to keep fraud in check.
