Dispute and Fraud Monitoring Program for Visa and Mastercard

This program oversees and manages disputes and fraud detection specifically for transactions involving Visa and Mastercard.

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 COUNT

DISPUTE RATE*

Classification

75

0.65%

Standard

100

0.9%

High Risk

1,000

1.8%

Excessive

* 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.

FRAUD VOLUME

FRAUD RATE

Classification type

50,000 USD

0.65%

Standard

75,000 USD

0.9%

High Risk

250,000 USD

1.8%

Excessive

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)

FRAUD VOLUME

FRAUD RATE

CLASSIFICATION type

50,000 USD

0.50%

Early warning

75,000 USD

0.9%

Standard

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)

FRAUD VOLUME

FRAUD COUNT

FRAUD RATE

Classification type

15,000 USD

150

0.45%

Early warning

25,000 USD

300

0.9%

Standard

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

FINE

ISSUER RECOVERY ASSESSMENT*

1

0 USD

No

2

1,000 USD

No

3

2,000 USD

No

4-6

5,000 USD

Yes

7-11

25,000 USD

Yes

12-18

50,000 USD

Yes

19+

100,000 USD

Yes

* 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

DISPUTE COUNT

CHARGEBACK RATE

FINES

300+

3%

Fines begin in month two and continue at increasing rates in subsequent months. See the timeline below for details.

NUMBER OF MONTHS ABOVE ECM THRESHOLDS

FINE

ISSUER RECOVERY ASSESSMENT

1

0 USD

No

2

1,000 USD

No

3

2,000 USD

No

4-6

10,000 USD

Yes

7-11

50,000 USD

Yes

12-18

100,000 USD

Yes

19+

200,000 USD

Yes

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

FINE

1

0 USD

2

500 USD

3

1,000 USD

4-6

5,000 USD

7-11

25,000 USD

12-18

50,000 USD

19+

100,000 USD

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.