Visa & Mastercard Dispute and fraud Monitoring
Program
At Livil , we prioritize maintaining a secure and trustworthy payment ecosystem. To uphold our
commitment to the card networks and ensure compliance with their monitoring programs, we have
established this Visa Mastercard Monitoring Policy. This policy outlines our approach to preventing
and managing disputes and fraud, as well as our procedures for participating in the monitoring
programs enforced by Visa and Mastercard.
1. PREVENTING DISPUTES AND FRAUD
Preventing disputes and fraud is essential to maintaining a
healthy payment environment. Our
prevention measures include:
-Utilizing industry-leading fraud detection tools and strategies.
-Verifying customer information to reduce the risk of fraudulent transactions.
-Monitoring and analyzing payment data to identify potential fraudulent activities.
-Regularly updating and implementing risk evaluation and risk settings in our systems.
-For a comprehensive guide on preventing disputes and fraud, please refer to the Prevention Guide
As a financial institution operating in partnership with Visa and Mastercard, we must keep the
levels of disputes and fraud within acceptable thresholds set by the card networks. If these
thresholds are exceeded, Livil may be placed into one of the monitoring programs established by
Visa and Mastercard
2. Visa monitoring programs
Visa operates several monitoring
programs, including the Visa Fraud
Monitoring Program (VFMP)
and
Visa Dispute Monitoring Program (VDMP). We are subject to these programs if our dispute or fraud
levels go beyond Visa's established thresholds.
-VFMP: This program applies to businesses in all supported
countries and focuses on reducing
fraud
levels.
-VDMP: VDMP applies when a business
experiences a
higher-than-average number of disputed
payments.
Like VFMP and VDMP, VFMP Digital Goods is a global program while
VFMP 3DS only applies to
businesses based in the US.
Each program timeline spans a 12-month period and determines
what actions to take on a
monthly
basis. At the beginning of each month, Visa reviews your previous month’s activity to see if it
has
exceeded any of their established thresholds. If so, we’ll reach out and discuss this with you.
For users in the US, Europe, Canada, Australia, and Brazil, domestic and cross-border activity
counts towards their monthly totals. For users outside of those regions, only cross-border
activity
is counted.
Visa operates an early warning system that warns users—through
Livil—who are at risk of being
placed into a monitoring program. Users who meet the early warning threshold aren’t immediately
placed into the program. Instead, they’re given the opportunity to reduce the level of fraud on
their account to avoid placement.
Early warning notifications might not occur if your account
immediately matches or exceeds
the
Standard or Excessive thresholds of either program.
In the event of threshold breaches within Visa and Mastercard
monitoring programs, Livil is
committed to implementing a comprehensive remediation process to address and rectify the
identified
issues. Our remediation approach is designed to minimize disruptions, foster continuous
improvement, and ensure sustained compliance with the stringent standards set by the card
networks.
Upon detection of a trigger event or surpassing established
thresholds, our remediation
process
initiates promptly. The process encompasses a series of strategic steps aimed at resolving the
specific concerns flagged during the monitoring review. Our dedicated team, well-versed in the
nuances of Visa and Mastercard monitoring programs, takes swift action to develop and implement
a
customized remediation plan tailored to the identified issues.
2.1 VDMP: Visa Dispute Monitoring Program
The VDMP focuses on monitoring disputes or chargebacks. Visa
considers the total number of
disputed
payments (Dispute Count) and the ratio of disputed payments to all payments (Dispute Rate). If
your
account meets or exceeds the thresholds for these criteria, you may be placed into the
VDMP.
Visa issues early warning notifications to users who are at risk
of being placed into the
monitoring program. This provides an opportunity to take action and reduce the dispute level to
avoid placement.
Visa will remove you from the VDMP if your level of disputes
drops below the standard
threshold for
three consecutive months.
* Dispute Rate = (Current month dispute count /Current month transaction count) * 100
No fines are levied at the early warning level of the VDMP. At the Standard level, no fines are
charged for the first four months. After that, merchants will be charged $50 per dispute. At the
Excessive level, these $50 fines apply immediately.
Starting at the tenth month of enrollment merchants may be required to undergo audits, and
merchants outside of the EU may be subject to a $25,000 review fee.
If a merchant remains stuck in the VDMP for a full year, Visa may exercise their right to ban
the
merchant from the Visa network entirely, cutting them off from accepting any Visa payments.
Acquirers can also set their own excessive chargeback thresholds, and it’s not uncommon for them
to
terminate a merchant account before it reaches the breaking point with Visa.
While not all merchants will face this fate, losing the ability to accept Visa cards can be a
business-ending event for a retail merchant. As such, it's extremely important for merchants
enrolled in the VDMP to do whatever it takes to lower their dispute ratio and get out as quickly
as
possible.
2.2 VFMP: Visa Fraud Monitoring Program
VFMP applies to users with an excessive level of fraud on their account, which Visa calculates
using early fraud warning data sourced from their “TC40” reporting. Visa monitors the total
volume
of fraudulent Visa payments (Fraud Volume) and the ratio of fraudulent payments to all payments
(Fraud Rate). If your account exceeds the thresholds specified by Visa, you may be placed into
the
VFMP.
There are no fines at the early warning level of the VFMP. At the Standard level, fines starting
at
$25,000 may be assessed after four months. At the Excessive level, fines starting at $10,000 may
be
assessed immediately.
After four months at the Standard level or immediately at the Excessive level, merchants are
also
eligible to receive chargebacks.
After twelve months in either the Standard or Excessive programs, Visa may exercise their right
to
cut off the merchant’s ability to process Visa payments. Merchants in the Excessive program may
also be subject to additional fines.
2.2.1 VFMP: Visa Fraud Monitoring Program-3DS (US-only)
VFMP-3DS applies to US users with an excessive level of domestic 3D-Secure fraud on their
account.
Users are placed into this program if they meet or exceed the thresholds for both of the
following
criteria:
- The total volume in US dollars of Visa 3DS domestic payments
that are fraudulent (fraud
volume)
- The ratio of the volume in fraudulent payments to 3DS domestic
payments (fraud rate)
VFMP: Visa Fraud Monitoring Program (Digital Merchants)
The VFMP Digital Goods program is applicable to small ticket and digital goods merchants. It
targets excessive levels of fraud specific to transactions with certain Merchant Category Codes
(MCCs). The included MCCs are:
- 5735 — Record Stores
- 5815 — Digital Goods Media — Books, Movies, Digital
artwork/images, Music
- 5816 — Digital Goods — Games
- 5817 — Digital Goods — Applications (Excludes
Games)
- 5818 — Digital Goods — Large Digital Goods
Merchant
Users are placed into this program if they meet or exceed the thresholds for all of the
following
criteria:
- The total volume in US dollars of Visa payments are fraudulent
(Fraud volume)
- The total count of fraudulent transactions exceeds 300 (Fraud
count)
- The ratio of volume in fraudulent payments to all payments
(Fraud rate)
During the initial months, there are no penalties. The merchant operates without incurring any
fines related to fraudulent disputes on 3DS transactions.
If fraudulent disputes persist into the fifth and sixth months, the merchant faces a fine of
25,000
USD. During this period, issuers (entities issuing payment cards) retain the ability to raise
fraudulent disputes on 3DS transactions across all markets.
Should the fraudulent dispute situation persist into the seventh through ninth months, the fine
increases to 50,000 USD.
For the tenth through twelfth months of ongoing fraudulent disputes, the fine further escalates
to
75,000 USD. Issuers maintain the ability to raise fraudulent disputes on 3DS transactions across
all markets during this period.
If fraudulent disputes persist for twelve or more consecutive months, the fine remains at 75,000
USD, and the merchant becomes eligible for disqualification. Disqualification implies that the
merchant is no longer permitted to process Visa payments, reflecting a severe consequence for
prolonged issues with fraudulent disputes.
Mastercard monitoring programs
Similar to Visa, Mastercard also operates monitoring programs to ensure compliance with
thresholds
related to disputes and fraud.
Mastercard's Excessive Chargeback Program (ECP) comprises two tiers: Excessive Chargeback
Merchant
(ECM) and High Excessive Chargeback Merchant (HECM), applying to users across all supported
countries. Additionally, the Excessive Fraud Merchant (EFM) Compliance Program is a distinct
initiative applicable to users in all supported countries, excluding Germany, India, and
Switzerland.
Should your account surpass the specified program thresholds, Mastercard enrolls you in the
program, and Livil promptly notifies you. In instances where you exceed both EFM and ECP
thresholds, you are placed in EFM but not ECP. To illustrate, if you surpass EFM and ECP
thresholds
in March and April but only exceed ECP thresholds in May, you would enter month 2 of EFM in
April
and incur fines accordingly. Subsequently, in May, you would be placed in month 3 of ECP,
prioritizing EFM identifications from prior months.
Remediation
You exit the Early Chargeback Monitoring (ECM) once your dispute levels consistently fall below
the
ECM threshold for three consecutive months. If you are in the High Early Chargeback Monitoring
(HECM) and experience a reduction in disputes that, although still exceeding ECM thresholds
(ranging between 1.5-2.99%), you transition to that program. Removal from the Early Fraud
Monitoring (EFM) requires avoiding at least one of the conditions for three consecutive months.
Accurate monitoring of dispute (chargeback) and fraud levels is crucial. Notably, Mastercard
tallies disputes regardless of whether they were concealed due to a refund, irrespective of the
liability shift, or whether the dispute was won. Disputes and fraud are recorded based on the
date
of the dispute or early fraud warning notification, not the payment date.
As part of the remediation process, it is imperative to furnish Livil with details outlining the
measures taken to prevent disputes and the implementation timeline.
ECP: Mastercard Excessive Chargeback Program
Users qualify for the Excessive Chargeback Program (ECP) if they surpass the thresholds for two
criteria:
- The total number of Mastercard payments that have been disputed
(chargeback count)
- The chargeback-to-transaction ratio (chargeback rate)
The chargeback rate is determined by calculating the ratio of disputed payments to all payments.
Specifically, it is the number of Mastercard disputes received in a calendar month compared to
the
total number of Mastercard payments from the preceding month. Qualification for the ECP requires
exceeding both of these specified thresholds.
ECM: Mastercard Excessive Chargeback Merchant
DISPUTE COUNT CHARGEBACK RATE FINES
100-299 1,5-2.99% Fines begin in month two and continue at increasing rates in subsequent
months.
See the timeline below for details.
Number of month above ecm
thresholds
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ISSUER RECOVERY
ASSESSMENT*
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* Issuer recovery assessment applies an additional 5 USD per chargeback fee for each chargeback
over 300 chargebacks. For example, a merchant identified in month 4 of ECM with 400 disputes
will
be assessed a 5,500 USD fine (5,000 USD + (400-300) x 5 USD).
HECM: Mastercard High Excessive Chargeback Merchant
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Fines begin in month two
and continue at increasing rates in subsequent months. See the
timeline below for details.
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NUMBER OF MONTHS ABOVE
ECM THRESHOLDS
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ISSUER RECOVERY
ASSESSMENT
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Mastercard communicates total fine amounts to merchants through Livil.
EFM: Mastercard Excessive Fraud Merchant Compliance Program
Users are enrolled in EFM if they satisfy or surpass the thresholds for several criteria:
- Number of e-commerce Mastercard payments
- The total volume in US dollars of Mastercard payments that
result in fraudulent chargebacks
(net
fraud volume) calculated by dispute reason code (reason code 4837 and 4863)
- The fraud-count-to-transaction ratio (fraud chargeback rate)
- The ratio of 3DS Mastercard payments to all Mastercard
payments
The calculation method for the fraud chargeback rate closely mirrors that of the chargeback rate
found in ECM or HECM, with the sole distinction being that the fraud chargeback rate is
determined
exclusively based on fraudulent chargebacks.
EFM applies to users who meet all of the following conditions:
- Minimum of 1,000 e-commerce Mastercard payments
- Net fraud volume is greater than 50,000 USD
- Fraud chargeback rate is greater than 0.50%
- Total 3DS Mastercard payment count is less than:
o10% of total Mastercard payment count (non regulated countries)
o50% of total Mastercard payment count (regulated countries)
NUMBER OF MONTHS ABOVE
ECM THRESHOLDS
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You can request that Mastercard suspend an assessed fine once during an open case, meaning that
the
request should happen when you’re confident you’ll be below thresholds in the next 3 consecutive
months. If you request a suspension of fines, avoid identification in the next 2 months, but
then
exceed the thresholds in the following month, fine assessments would continue until you exit the
program.
