The Visa Fraud Monitoring Program, or VFMP, is a merchant compliance platform aimed at identifying and tracking merchants that receive too many chargebacks with “fraud”-related reason codes.
If you’re entered into the VFMP, that means Visa will keep tabs on your activity. You’ll also be subject to regular compliance reviews and other oversight. If you can't get your fraud rate below an “acceptable” threshold, even after the program term, your bank account could be terminated, leaving you unable to process cards.Learn more about the VFMP
The VFMP is a general program, not specific to any one merchant category code (MCC). However, a new update to the program — the Visa Digital Goods Merchant Fraud Monitoring Program — is specifically aimed at digital goods merchants.
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What is the Visa Digital Goods Merchant Fraud Monitoring Program?
The Visa Digital Goods Merchant Fraud Monitoring Program is an update to (and extension of) the Visa Fraud Monitoring Program. As the name implies, this subset of the VFMP is aimed at digital goods merchants.
The main difference is the threshold that's considered "noncompliant" under program rules. For most merchants, the standard program threshold is $75,000 worth of fraud attacks and 0.9% of sales volume in a single month.
In the new program, the threshold is $25,000 worth of fraud attacks and 0.9% of sales volume in a single month and 300 fraudulent transactions. This means the dollar amount is a lot lower than VFMP. However, including a minimum transaction number gives you a bit more wiggle room.
When you've moved into the program, Visa will require you to develop a mitigation plan with your acquiring bank to address your rising chargeback problem. For the first four months, you won’t have to worry about any penalties or additional fees associated with the Visa Digital Goods Merchant Fraud Monitoring Program. But, if you're unable to get your chargeback rate under the acceptable threshold after those first four months, Visa will begin assessing fines and fees for every chargeback you receive.
Who Does This Apply To?
The Visa Digital Goods Merchant Fraud Monitoring Program is effective as of April 1, 2023.
The program focuses on small ticket and digital goods merchant fraud transactions. As such, it is limited to merchants in the following merchant category codes (MCCs):
- MCC 5735 — Record Stores
- MCC 5815 — Digital Goods: Media (Books, Movies, Digital Artwork, Images, Music)
- MCC 5816 — Digital Goods: Games
- MCC 5817 — Digital Goods: Applications (excluding games)
- MCC 5818 — Digital Goods: Large Digital Goods Merchant
Visa provides further merchant category code information in the Visa Merchant Data Standards Manual.
Ultimately, the Visa Digital Goods Merchant Fraud Monitoring Program will include specific thresholds for fraud amounts and fraud counts. Additionally, a 6-month advisory period will be implemented by Visa before non-compliance assessments are levied.
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Visa Digital Goods Program Thresholds
Visa Digital Goods Merchant Fraud Monitoring Program thresholds break down into two categories: standard and early warning. Acquirers will be notified if a merchant meets or exceeds the program thresholds outlined below:
Standard Visa DGMFM Threshold
|Program Type||Threshold Criteria||Program Status|
|Standard||USD 25,000 Fraud Amount; and|
300 Fraud Count; and
0.9% Fraud Sales Ratio
|Month 1: Notification|
Months 2-4: Workout Period
Month 5+: Enforcement Period
If you are a digital goods merchant who exceeds this threshold criteria, your acquirer will be required to submit a remediation plan to Visa starting in Month 2 of the program. If you meet or exceed the thresholds for both the Visa Digital Goods Merchant Fraud Monitoring Program and the VFMP, your acquirer will be subject to only one non-compliance assessment. Visa will also remove a compliance case in the event of duplicate identification.
Early Warning Visa DGMFM Threshold
|Program Type||Threshold Criteria|
|Early Warning||USD 15,000 Fraud Amount; and|
150 Fraud Count; and
0.45% Fraud Sales Ratio
Early warning notifications are intended to provide acquirers and merchants with the opportunity to reduce fraud levels before they are subject to Visa program terms. If your fraud levels meet the above criteria, your acquirer will be given “early warning” notifications that your fraud levels are approaching program limits.
Remaining in the program for longer will mean incurring more fees. Non-compliance assessments may reach up to $75,000 per month, depending on duration. Check out our main VFMP article for more information on the program fee schedule:Learn more about the VFMP
When Does This Take Effect?
In order to give banks and merchants time to familiarize themselves with the Visa Digital Goods Merchant Fraud Monitoring Program, the advisory period will run from April 1 through March 31, 2024. The advisory period was originally slated to end on August 31, 2023, with the program becoming fully operational at the beginning of October of that year. However, this was revised to give merchants more time in which to prepare.
Just like VFMP, the new platform will be based on fraud and sales transactions that took place in the prior month. During this timeframe, Visa will notify acquirers if you, the merchant, met or exceeded program thresholds.
No action is required from merchants and acquirers during the advisory period. That said, Visa does recommend the following actions to get ready in the meantime:
- Acquirers should notify their merchants and appropriate third-party agents of the implementation date for the Visa program. They should also ensure adequate risk controls are maintained prior to the operational date (April 2024).
- Acquirers should carefully review merchants’ business practices, ensuring their terms and conditions are properly disclosed to consumers, and that they operate in compliance with the Visa network rules.
- Acquirers should independently track fraud performance for digital goods merchants. The aim here should be to ensure fraud activity does not approach or exceed program thresholds.
Again, Visa naturally reserves the right to update its risk compliance programs as it deems necessary. In other words, it behooves you, as a merchant, to pay close attention to these program updates and adjust course accordingly.
Pros & Cons of the New VFMP Extension
From the perspective of a digital goods merchant, this development has both upsides and downsides.
On one hand, it's a recognition by Visa that digital goods merchants face different conditions than other merchants. The lack of such recognition has been a common complaint from merchants since the outset of VFMP.
Digital goods merchants sell a lot of goods that tend to have a low-ticket value; often just a few dollars. It's good that Visa is regarding merchants more specifically based on the conditions they face, and implementing a minimum transaction amount for VFMP designation.
On the other hand, the new designation doesn’t leave digital goods merchants less likely than any other merchant to end up in the VFMP. It’s still not an ideal situation for anyone.
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How to Get Out of the Visa Digital Goods Merchant Fraud Monitoring Program
Like the standard to VFMP, you can be removed from the Visa Digital Goods Merchant Fraud Monitoring Program. But, as you probably guessed, there are some qualifications to that.
You can exit the program only after keeping your fraud rate below the acceptable threshold for three consecutive months. If you make it through two months, then breach the threshold again, you’ll need to start over.
You should also keep in mind that, while you can be moved from a standard monitoring program to an excessive-risk one, the opposite is not true. Visa won’t move merchants from the excessive monitoring program to the standard monitoring program, regardless of performance.
If you fail to bring your fraud rate under control after 12 months in either the standard or excessive fraud program, you become eligible for disqualification. This means Visa could block you from accepting Visa payments altogether and ban you from the network. Considering that Visa is the most widely-used card brand throughout North America and Europe, disqualification from the Visa network could be catastrophic for your business.
Avoid the Visa Digital Goods Merchant Fraud Monitoring Program
Ultimately, it’s extremely important to keep your Visa fraud rate below acceptable limits. In order to do this, you should focus on building the right strategy to limit your fraud exposure.
A few tips to achieve a successful risk-mitigation strategy include:
- Adopting a multilayer approach
- Educating yourself about fraud red flags
- Manually reviewing transactions when needed
- Seeking outside help
Have additional questions about the Visa Digital Goods Merchant Fraud Monitoring Program? Need help bringing your fraud losses under the threshold established by Visa? Don’t worry — help is just a click away!
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