Visa’s Monitoring Programs: An Essential Guide to VDMP & VFMP

Chargebacks and fraud pose significant challenges for merchants worldwide. However, Visa, a major card network, offers the Visa Dispute Monitoring Program (VDMP) and the Visa Fraud Monitoring Program (VFMP) to help merchants manage these issues. These programs help merchants keep fraud and chargeback rates low. While they are helpful, it’s worth mentioning that merchants may face fines if they exceed certain program thresholds.

In this article, we’ll discuss the VDMP and VFMP, how Visa monitoring programs can affect your business, threshold levels, fines, and how to get out of them.

Introduction to Visa Monitoring Programs

The Visa Dispute Monitoring Program (VDMP) is a global initiative by Visa to combat high chargeback ratios among merchants. When a merchant surpasses Visa’s predefined dispute thresholds, they automatically enroll in VDMP. This program signifies Visa’s close monitoring and necessitates collaboration with the acquiring bank to develop a corrective plan. Failure to rectify Visa chargeback issues within four months or surpassing higher thresholds results in fines for each additional chargeback.

VDMP operates on the premise that high chargeback rates may stem from various merchant errors, including inadequate fraud prevention, billing practices, customer service, misleading marketing, or unreliable shipping. As an integral part of Visa’s enforcement, VDMP encourages merchants to address these issues promptly, as prolonged non-compliance can jeopardize their ability to accept payments.

The Visa Fraud Monitoring Program (VFMP) is Visa’s initiative to help merchants combat high rates of fraudulent transactions. It emphasizes reducing fraudulent chargebacks and assigns liability in fraud-related disputes. VFMP also encourages merchants to enhance their fraud detection practices.

If a merchant enters VFMP, they must develop a mitigation plan with their acquiring bank within a four-month initial grace period. Failure to meet acceptable chargeback thresholds during this time results in fines for each subsequent chargeback.

While it may seem stringent, Visa can enforce rules within its network. VFMP applies to users exceeding specific fraud criteria, and early warnings may not be issued if the account immediately matches or surpasses the program’s thresholds.

VDMP vs. VFMP: What Sets Them Apart?

Visa’s monitoring programs, VDMP and VFMP, have different roles in protecting its payment network. VDMP focuses on reducing high chargeback rates, while VFMP deals with increases in fraudulent chargebacks. VDMP sets its limits based on the number of disputes compared to total transactions, while VFMP uses the total dollar amount of fraudulent chargebacks compared to legitimate transactions.

Both programs give merchants a four-month grace period to resolve issues without penalties. However, if merchants have excessive issues, they move to a higher level of notice where the grace period is waived, requiring immediate action.

How Visa Monitoring Programs Can Affect Your Business

Visa’s monitoring programs can greatly impact businesses in the Visa payment system. Being in these programs can be costly due to chargebacks, fines, and fees. The longer businesses stay in these programs, the greater the financial burdens become. High chargebacks and fraud rates can even lead to losing the ability to accept Visa payments, which means losing revenue.

Managing these challenges often requires extra resources, like hiring staff, implementing fraud prevention measures, and conducting audits. It’s important to have a clear plan to exit the programs to reduce these impacts. Quickly resolving issues and meeting Visa’s standards is crucial for maintaining financial stability.

Enrollment Threshold Levels

Visa’s monitoring programs use specific metrics to assess how well merchants are performing. These metrics help decide how serious the program’s impact will be on the merchants involved:

The VDMP has two levels: Standard and Excessive.

Visa instructs acquirers to evaluate each merchant’s dispute ratio monthly, considering only the first ten disputes associated with a specific card number. This method ensures fairness and prevents businesses with low transaction volumes from being unfairly penalized due to isolated chargebacks. There are also minimum dispute requirements for enrollment.

Visa issues an early warning if a merchant has a 0.65% dispute ratio and at least 75 total disputes. The standard threshold requires a 0.9% dispute ratio and at least 100 total disputes. The excessive threshold requires a 1.8% dispute ratio and at least 1,000 total disputes.

Visa can elevate merchants to the Excessive level at their discretion, especially those operating under high-risk Merchant Category Codes, even if they’ve only reached the Standard threshold.

The Visa Fraud program also has two enrollment thresholds: Standard and Excessive.

Visa’s system uses fraud-related chargebacks and other data to identify qualifying merchants. Unlike the VDMP, the VFMP calculates the fraud rate based on the total dollar value of fraudulent transactions compared to legitimate ones instead of using a transaction count approach. To avoid unfairly penalizing small businesses, VFMP enforces a minimum transaction volume requirement and only considers the first ten instances of fraud for a given card number.

The VFMP thresholds are as follows:

• Early warning: 0.65% fraud rate and a minimum of $50,000 in total fraud.
• Standard: 0.9% fraud rate and at least $75,000 in total fraud.
• Excessive: 1.8% fraud rate and a minimum of $250,000 in total fraud.

In the United States, merchants using 3D Secure (Visa Secure) are subject to an additional program called VFMP-3DS, which assesses the fraud rate of transactions using Visa Secure technology. VFMP-3DS thresholds are:

• Early warning: 0.5% fraud rate and at least $5,000 in total fraud from Visa Secure transactions.
• Standard: 0.75% fraud rate and at least $7,500 in total fraud from Visa Secure transactions.

Merchants enrolled in VFMP-3DS should know they may lose certain fraud liability protections associated with 3D Secure.

Fines and Charges

Once a merchant exceeds the Standard or Excessive thresholds, they will face fines based on the number of disputes accrued and duration within the program. Below are the fines for both programs’ Standard and Excessive thresholds:

VDMP Fines

Threshold Level	Months	Fines
Early Warning	1-4	N/A
Standard	5-9	$50/€45 per dispute
Standard	10-12	$50/€45 per dispute and $25,000/€21,750 review fee
Excessive	1-6	$50/€45 per dispute
Excessive	7-12	$50/€45 per dispute and $25,000/€21,750 review fee

While in the Standard level, Visa might request a third-party review, which the merchant has to pay for. If a merchant is flagged in the Excessive level, they remain liable for fines until their performance improves to meet the Standard level. Visa can also decide to conduct a third-party audit at their discretion.

VFMP Fines

The VFMP structure indicates that if a merchant surpasses the Standard or Excessive thresholds, they will incur fines based on the duration they remain above these thresholds. The fines increase progressively the longer they remain non-compliant, emphasizing the need to address fraud issues promptly to avoid escalating penalties.

Threshold Level	Months	Fines
Early Warning	1-4	N/A
Standard	5-6	$25,000/€21,750
Standard	7-9	$50,000/€43,500
Standard	10-12	$75,000/€62,250
Excessive	1-3	$10,000/€8,750
Excessive	4-6	$25,000/€21,750
Excessive	7-9	$50,000/€43,500
Excessive	10-12	$75,000/€62,250

Reason Code 10.5 for chargebacks expedites the issuer’s recovery of fraud-related losses. The liability shift remains in effect as long as the merchant consistently maintains performance below the specified threshold for three consecutive months before the case closure. Additionally, Visa may mandate a third-party review at the merchant’s expense. Merchants who do not demonstrate positive outcomes from their remediation efforts might be required to undergo an operational risk assessment. In such cases, the merchant will select a firm from Visa’s list of approved review vendors to conduct an evaluation aimed at assisting the merchant in formulating an effective remediation plan.

How to Get Out of the VDMP and VFMP

Getting out of the VDMP and the VFMP is critical for merchants seeking to regain control of their financial standing and reputation. Here’s how to get out of them:

Getting Out of the VDMP

To exit the VDMP, merchants must stay below the standard dispute threshold of 0.9% for three consecutive months. If, at any point during this period, either the dispute count or dispute ratio falls below the established thresholds, the merchant is considered compliant for that particular month. Working closely with their acquiring bank is essential to developing a comprehensive chargeback mitigation plan. This plan, which should be submitted to Visa, demonstrates the merchant’s proactive approach to addressing the issue.

Getting out of the VFMP

Merchants can exit the Visa Fraud Monitoring Program by maintaining their fraud rate below the standard threshold of 0.9% for three consecutive months. During this process, Visa will inquire about the anti-fraud tools in use and may request the submission of a fraud remediation plan developed with an acquiring bank. To enhance their chances of compliance and exit, merchants should consider adopting additional anti-fraud tools.

Avoidance Tactics: Keeping Clear of Visa Monitoring Programs

Preventing your entrance to either of the monitoring programs will save you plenty of time and nerves in the long run. Here are some avoidance tactics you can take:

While the overall goal should be to minimize the number of transactions that require manual review, it’s crucial to conduct thorough reviews of transactions flagged as potential fraud. Regular manual transaction reviews are the cornerstone of effective chargeback and fraud prevention.

By consistently examining transactions, merchants can proactively detect anomalies or irregularities. This hands-on approach helps identify potential issues before they escalate, allowing for immediate intervention.

Outstanding customer service is a great tool for preventing chargebacks. It involves addressing customer concerns promptly and professionally to prevent disputes. Chargebacks often occur when customers don’t recognize purchases on their billing statements or have trouble reaching customer service. Other causes include shipping errors, like damaged goods or incorrect deliveries. To prevent these issues, improve customer service protocols by ensuring accurate order fulfillment, quick responses, clear billing descriptors, and detailed product descriptions.

In RDR, disputes for Visa transactions are automatically resolved before becoming chargebacks. Merchants set criteria for the disputes RDR will handle, and eligible disputes are moved to a pre-dispute stage, where they are resolved with an automated credit to the cardholder. This prevents the disputes from affecting the merchant’s chargeback ratio, helping avoid fines and monitoring programs.

RDR differs from prevention alerts in that it automates dispute resolution and allows merchants to set liability thresholds for specific reasons or maximum amounts. The bank automatically refunds transactions meeting these criteria, preventing chargebacks.

Dedicated chargeback and fraud prevention tools and services are necessary for a proactive management approach. These tools provide real-time monitoring and send alerts when unusual activity or discrepancies are detected. This allows merchants to take immediate action to prevent issues from escalating into chargebacks.

These tools often include features like fraud detection, risk assessment, and chargeback alerts, enabling merchants to maintain lower dispute and Visa fraud rates, thereby reducing the risk of entering Visa’s monitoring programs. Tools like order validation, Tools like order validation aid in resolving disputes without the need of refunds, while prevention alerts provide early warnings to address disputes before they become chargebacks.

Concluding Thoughts: Staying Ahead of Visa Monitoring Programs

In summary, Visa uses two monitoring programs, VDMP and VFMP, to address chargebacks and fraud. Both programs have potential fines if certain thresholds are exceeded. To exit these programs, merchants must meet specific criteria and work closely with their acquiring banks to develop mitigation plans.

Avoiding entry into these programs will preemptively save time and resources. Merchants can employ strategies like manual transaction reviews, good customer service, RDR, and chargeback and fraud prevention tools to stay on top of their chargeback rates. These tactics help merchants stay clear of Visa’s monitoring programs and maintain a strong financial standing and reputation in the payment industry.

---

Tired of complicated pricing?

Choose a dependable merchant service provider who will find you a better rate!

Open a merchant account

100%

Transparent

---