Visa has announced a number of updates to its merchant chargeback and fraud monitoring programs, which will all come into effect in the New Year to ensure global consistency across program thresholds, timelines, fees and non-compliance assessments.
This uniformity is being introduced in a bid to offer aquirers a more efficient means of managing their merchants who are dealing with excessive chargebacks or fraudulent activity.
The original chargeback processing system was designed before the internet became the phenomenon it is today, and though it has seen some changes since its creation, a full update is long overdue.
The latest Visa chargeback regulations are designed in part to tackle the rising emergence of “friendly fraud”, which leaves the merchant financially responsible for customers that claim money back for a good or service they say wasn’t delivered, when in fact it was.
A rebranding exercise will take place in order to bolster this effort, with the Global Merchant Chargeback Monitoring Program changing to the Visa Chargeback Monitoring Program (VCMP) and the Merchant Fraud Performance Program changing to the Visa Fraud Monitoring Program (VFMP).
VFMP and VCMP will both review processed chargebacks from the previous month against sales transactions from the current month from all merchant outlets at the particular aquirer’s Business Identification (BID) number.
Under the new program thresholds, a merchant will be identified each month if it meets or exceeds 100 chargebacks and 1% ratio of chargebacks-to-sales transactions for VCMP, or $75,000 US in fraud amount and 1% ratio of fraud-to-sales dollar for VFMP.
Visa will use predetermined timelines in order to manage VCMP and VFMP, which will help to decide the terms of the progam for merchants. High-risk merchants will qualify for the aptly named timeline, ‘High Risk program timeline’ if they are categorized in one of the high brand-risk merchant category codes (MCCs) (as defined by Visa rules). This occurs if they meet or exceed the excessive threshold standards, or if they engage in actions that are considered detrimental to the Visa payment system.
Early Warning Notifications will also come into play in order to provide aquirers and merchants with the chance to reduce fraud and chargeback levels before a merchant is identified in VCMP or VFMP.
Remediation will be considered successful for merchants on both the standard and high-risk timelines in either VCMP or VFM if they remain below the new standard program thresholds for a consecutive period of three months.
While changes to the programs are needed, these updates still leave much to do in minimising fraud and are likely to place further pressure on the merchant, instead of the consumers when it comes to chargebacks.
