What is the Visa Digital Goods Merchant Fraud Monitoring Program?
The Visa Fraud Monitoring Program (VFMP) serves as a merchant compliance platform that detects and monitors merchants with excessive “fraud”-related chargebacks. When enrolled in VFMP, Visa will monitor your transactions and conduct regular compliance reviews. Failing to maintain an “acceptable” fraud rate even after the program’s duration may lead to account termination and an inability to process card transactions.
VFMP is a general program, applicable to all merchant category codes (MCCs). However, the updated Visa Digital Goods Merchant Fraud Monitoring Program specifically targets digital goods merchants.
What is the Visa Digital Goods Merchant Fraud Monitoring Program?
The Visa Digital Goods Fraud Monitoring Program is an extension and update to the Visa Fraud Monitoring Program (VFMP) that specifically targets digital goods merchants. This program aims to identify and monitor merchants within certain merchant category codes (MCCs) that have excessive “fraud”-related Visa chargebacks.
The main difference between the standard VFMP and the Visa Digital Goods Merchant Fraud Monitoring Program is the “noncompliant” threshold. For digital goods merchants, the updated program sets the threshold at:
- $25,000 in fraud attacks
- 0.9% of monthly sales volume
- 300 fraudulent transactions
All three of these conditions must be present for merchants to be subject. This lowers the dollar amount threshold but provides additional leeway with the minimum transaction number.
Who Does This Apply To?
Effective as of April 1, 2023, the Visa Digital Goods Merchant Fraud Monitoring Program’s advisory period started on April 1 and extends until August 31, 2023. The program is scheduled to become fully operational in October.
The program concentrates on small-ticket and digital goods merchant fraud transactions, applying to merchants in the following 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’s Merchant Data Standards Manual contains further MCC information.
Merchants enrolled in this program need to develop a mitigation plan with their acquiring bank to tackle the growing chargeback issue. The Visa Digital Goods Merchant Fraud Monitoring Program will establish specific thresholds for fraud amounts and counts, with a 6-month advisory period before non-compliance assessments are levied.
There will be no penalties or extra fees associated with the Visa Digital Goods Merchant Fraud Monitoring Program for the initial four months. However, if you cannot reduce your chargeback rate below the acceptable threshold after this period, Visa will impose fines and fees for each chargeback received.
Pros & Cons of the New VFMP Extension
For digital goods merchants, the VFMP extension has both advantages and disadvantages.
On the one hand, Visa acknowledges the unique conditions digital goods merchants face, which has been a longstanding complaint since VFMP’s inception. Digital goods merchants often sell low-ticket items, and Visa’s inclusion of a minimum transaction amount for VFMP designation reflects a more tailored approach.
On the other hand, the new designation doesn’t make digital goods merchants any less likely to enter VFMP. Entry into the program remains an undesirable situation for all parties involved.
How to Get Out of VFMP
Like the standard VFMP, the Visa Digital Goods Merchant Fraud Monitoring Program allows for removal. However, certain conditions apply. You can only exit the program after maintaining your fraud rate below the acceptable threshold for three consecutive months. Failing to do so within this period restarts the process.
It’s worth noting that while merchants can move from a standard monitoring program to an excessive-risk one, the reverse is not possible. Regardless of performance, Visa will not transfer merchants from excessive monitoring to standard monitoring.
Failure to control your fraud rate after 12 months in either the standard or excessive fraud program makes you eligible for disqualification. Visa may then prohibit you from accepting Visa payments and ban you from their network. As Visa is the most widely-used card brand in North America and Europe, being disqualified from the Visa network could have devastating consequences for your business.
Last Update: May 25, 2023
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