What is the Visa Dispute Monitoring Program? How Can the VDMP Affect Your Business?
The Visa Dispute Monitoring Program, or VDMP, gives Visa a way to keep tabs on chargeback activity at the merchant level. Visa uses the VDMP as a way to audit merchant outlets, identify any business generating an excessive number of disputes, and take action to address the situation.
Visa doesn’t engage in this process arbitrarily. The program is meant to fulfill multiple functions for Visa: flagging potential bad actors engaged in merchant fraud, helping legitimate merchants manage chargebacks, defending cardholders, and protecting the Visa brand. With VDMP, acquirers can identify merchants who exceed Visa chargeback thresholds and help them find ways to reduce chargebacks. They may also use it to assess fraud controls and review operations.
That said, being in the VDMP is not a pleasant experience. As a merchant, you want to avoid entering the program at all costs.
What is the Visa Dispute Monitoring Program?
Visa Dispute Monitoring Program
The Visa Dispute Monitoring Program, or VDMP, is a program administered by Visa for the purpose of controlling merchant chargeback issuances. If a merchant exceeds the monthly chargeback threshold set by Visa, they will be entered into the program. This will result in punitive fees, operating restrictions, and costly periodic reviews.
Like the comparable Visa Fraud Monitoring Program (VFMP), entry into the Visa Dispute Monitoring Program is like a type of "probation period" for merchants. It means that Visa identifies your recent activity as risky, based on the number of chargebacks filed against you during the previous month.
There are three tiers of the VDMP. The program tier that applies to you is based on whether your monthly chargebacks exceed a predetermined threshold:
| Program | Monthly Threshold |
| VDMP Early Warning | 0.65% chargeback ratio and 75 chargebacks |
| VDMP Standard | 0.9% chargeback ratio and 100 chargebacks |
| VDMP Excessive | 1.8% chargeback ratio and 1,000 chargebacks |
Each program tier carries different requirements and limitations on your activity.
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Is My Chargeback Rate Putting Me at Risk?
Your chargeback rate is the figure that Visa uses to determine whether you’re compliant with card network chargeback limits. Thus, it’s important that you keep up-to-date information about your chargeback issuances.
Visa and Mastercard calculate your chargeback rate differently. For Visa, you simply divide the number of transactions submitted in the current month by the number of chargebacks issued during the same month.
Just a couple of quick caveats: First, Visa only considers the first ten chargebacks filed per card number, per merchant account. So, if one customer files a bundle of chargebacks all at once, only the first ten will count. Visa will also not count any chargebacks that fall under Visa Reason Code 10.5 (Visa Fraud Monitoring Program).
Consequences of Entering the VDMP
If you land in the Visa Dispute Monitoring Program, the first thing you’re expected to do is to work with your acquirer to develop a detailed chargeback-reduction strategy, called a chargeback mitigation plan. This plan—which must be presented to Visa—should both identify the root cause of your chargeback problem and outline an appropriate plan to correct it.
That doesn’t sound so bad on its own. However, the fees and added costs are where the program becomes problematic.
The closer oversight from Visa comes along with added fees. With the VDMP Standard tier, Visa will begin fining your acquirer $50 for every dispute filed against you beginning with the fourth month of the enforcement period.
For merchants whose chargeback problem is considered “excessive,” (i.e. significantly above the Visa chargeback threshold), the enforcement period is 12 months. You’re also subject to a $50 per-dispute fee right from the beginning of the enforcement period. In both the standard and excessive programs, your acquirer will deduct these fees from your account.
There are also costly review fees to take into account. With both the regular and the excessive program, you’re subject to a $25,000 review fee toward the end of your enforcement period.
Can I Exit the VDMP? What Happens After the Enforcement Period?
Yes, you can. The point of the Visa Dispute Monitoring Program is not to punish merchants. Rather it’s to incentivize merchants to not only stop chargebacks from increasing but actually reduce chargeback issuances.
You may exit the VDMP if you manage to bring your chargeback rate below the monthly threshold and keep it there for three consecutive months. If you can accomplish this for two months, but then breach the threshold again, you’ll have to start over. But, if you manage to successfully exit the program, you are free to conduct business as usual, without the added program restrictions.
Remember, though: as a part of the VDMP, you’re expected to dedicate substantial effort and resources to get in compliance as quickly as possible. That’s why, if you’re not able to bring your chargeback rate within a compliant range during the 12-month program period, you may be disqualified from the Visa program entirely.
If you’re disqualified, you’d be barred from accepting Visa cards entirely. You would also likely lose your processing account, as your acquirer would regard you as too much of a liability. This could destroy your business.
How to Avoid Enrollment in VDMP
Keeping your business out of the Visa Dispute Monitoring Program should be a priority. More broadly, this should factor into your broader strategy to reduce and prevent chargebacks overall.
You can—and should—fight chargebacks through the representment process. However, this will not really have any impact on your chargeback rate, even if you win a dispute. The only way to ensure that you keep your chargeback rate below the Visa threshold is to prioritize prevention. This calls for a comprehensive chargeback management strategy aimed at identifying chargebacks by their source.
So…how do you prevent chargebacks and stay within the VDMP safe zone? The key is segmenting Visa disputes by their source, then deploying the necessary strategies to address chargeback triggers.
Adopting a multilayer fraud strategy will allow you to prevent chargebacks triggered by criminal fraud. You should make the most of validation tools like Address Verification Service (AVS), CVV verification, and 3-D Secure, just to name a few. You should prioritize data security, and use fraud scoring to flag suspicious transactions.
It’s helpful to think about other chargeback sources as a spectrum; you have deliberate merchant abuse on one end and deliberate cardholder abuse on the other. Between those two poles is a span of potential chargeback triggers that you can prevent with the right practices in place.
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FAQs
What is the Visa Dispute Monitoring Program?
The Visa Dispute Monitoring Program, or VDMP, is a program administered by Visa for the purpose of controlling merchant chargeback issuances. If a merchant exceeds the monthly chargeback threshold set by Visa, they will be entered into the program.
What Happens if I Enter the VDMP?
Merchants in the Visa Dispute Monitoring Program face punitive operating restrictions, as well as a $50 per-chargeback fee. They will also be required to create a chargeback mitigation plan, and may face a $25,000 review process if they can’t reduce their chargeback issuances in the timeframe allowed by Visa.
What Happens if I Can’t Get My Chargeback Rate Under the Visa Threshold?
If a merchant is unable to meet the requirements to exit the VDMP by the end of the twelve-month program duration, they may be disqualified from the Visa program. This would leave them unable to accept Visa cards.
How do I exit the VDMP?
To exit the VDMP, a merchant must bring their chargeback rate under the Visa threshold and keep it there for three consecutive months.
Is VDMP the Same as VFMP?
The Visa Fraud Monitoring Program, or VFMP, is similar to the VDMP. However, the programs have some key differences, including the standards required to maintain compliance, and the requirements for program merchants. You can click here to learn more about the VFMP.
