What is the Visa Chargeback Monitoring Program?

As the name implies, the Visa Chargeback Monitoring Program, or VCMP, is a program administered by Visa. It exists to identify and monitor merchants struggling with Visa transaction disputes (commonly called chargebacks).

Acquirers can use the Visa Chargeback Monitoring Program to single-out merchants with excessive chargebacks. They can help assess and review the merchant’s situation, with the eventual goal of reducing chargeback issuances. This serves two primary functions: to help acquirers manage chargebacks, and to protect the Visa brand name.

But while the Visa network and acquirers benefit from the program, online merchants may not love the VCMP so much.

Why Would a Merchant Be Enrolled in the VCMP?

The Visa Chargeback Monitoring Program is something like a probation for merchants. According to Visa’s guidelines, the merchant is engaged in risky behavior, and the VCMP exists to mitigate the risk associated with those actions. Any merchant identified as “high-risk” may be enrolled in the VCMP, including those who:

• Operate in a high-risk merchant category code (MCC).
• Work with an acquirer subject to risk reduction measures for poor management practices.
• Do “undue harm” to the Visa brand.

What qualifies as “undue harm” in reference to merchant chargebacks? Typically, this means the merchant receives excessive transaction disputes, and the business’s chargeback-to-transaction ratio exceeds the acceptable threshold determined by Visa.

As a general rule, Visa sets their chargeback threshold at 100 disputes per month, or 1% of overall transactions. Merchants who exceed this threshold could be designated as “high risk” and enrolled in the Visa Chargeback Monitoring Program.

The Cost of VCMP Participation

Just because a merchant is enrolled in the Visa Chargeback Monitoring Program doesn’t mean they’ve actually been accused of committing or enabling fraud. However, it does mean that Visa is keeping an eye on that merchant and watching closely for fraud, noncompliance, and other problems.

When a merchant is enrolled in the VCMP, the first step is to develop a chargeback mitigation plan. This is a detailed and comprehensive strategy developed alongside the acquirer which the merchant will use to reduce chargeback issuances. A solid plan will identify the root cause of the chargebacks—whether it’s criminal fraud or merchant error—and outline a course of action to correct the problem. The chargeback mitigation plan must be submitted to Visa and approved before the merchant can proceed.

Of course, the oversight and monitoring services required by Visa do not come free. The real burden of the VCMP are the costs associated, which include:

• Increased fees assessed per every dispute filed.
• Regular account reviews, which eat-up valuable time and overhead.
• Unusual Activities Reports, which can occur if the merchant sees atypical buyer activity.
• $25,000 fee for a detailed review conducted by Visa every six months.

…Then, add to that the cost of the chargebacks which caused the problem in the first place.

Merchants can’t take the VCMP lightly. Even if the merchant manages to emerge from the program, they will still lose tens—or even hundreds—of thousands of dollars in the long run.

Can Merchants Avoid the VCMP?

There is no “secret trick” that merchants can employ to avoid the Visa Chargeback Monitoring Program. The only real answer is simply to avoid chargebacks. The best way to accomplish this is to separate chargebacks based on one of three primary sources:

• Merchant Error
• Criminal Fraud
• Friendly Fraud

Merchants can implement preventative measures to stop chargebacks resulting from merchant error and criminal fraud before they happen. However, roughly 60-80% of all chargebacks can be traced back to friendly fraud, which has no definite preventative method. Preventing friendly fraud is possible; however, it requires that merchants consistently engage in the representment process.

Have additional questions about the Visa Chargeback Monitoring Program?

Contact the Payment Dispute Standards & Compliance Council today to learn more.