Visa Dispute Monitoring Program (VDMP)

What Is the Visa Dispute Monitoring Program?

The Visa Dispute Monitoring Program (VDMP) is a framework that Visa uses to monitor the rate of disputes and chargebacks for each of its merchants. It’s also used to impose financial sanctions and remediation measures on merchants that consistently exceed expected chargeback ratios.

Any business that accepts Visa payments is at risk of being placed within the program if its ratio of chargeback disputes passes over certain monthly thresholds.

Being placed under the VDMP can result in fines for each disputed transaction and a considerable administrative overhead to prove steps taken toward compliance. For businesses that are entered into an enforcement phase for a prolonged period, there’s also a substantial review fee to exit the program.

The usual reason for being placed under the VDMP is that a merchant has exceeded a specific dispute count or ratio in any given month. However, some businesses that operate in areas known for a high level of disputes may be placed in a “high risk” category at any time.

The Visa Dispute Monitoring Program was formerly known as the Visa Chargeback Monitoring Program (VCMP).

How Does the Visa Dispute Monitoring Program Work?

Companies that are placed under the Visa Dispute Monitoring Program are notified via their card acquirer. The trigger for this is almost always an excessive ratio of chargebacks, which could potentially be a result of chargeback fraud.

Chargeback ratios are calculated over a set period (we’ll use a monthly basis here) and involve dividing the total number of chargebacks by the total number of transactions processed by the merchant in the same month. When determining whether to place a merchant into the VDMP, Visa looks at:

• The dispute count: the total number of disputed transactions over a set period of time (such as each month)
• The dispute ratio: the percentage of the dispute count compared to the total number of transactions over a set period of time (such as each month)

The dispute ratio is derived by dividing the total number of chargebacks by the total number of transactions processed by the merchant during the given time period. It provides a percentage that indicates the proportion of disputed transactions in relation to the overall transaction volume.

The VDMP operates using four distinct compliance thresholds. The first, known as “Early Warning”, is not considered a breach and doesn’t result in fines. Instead, it’s intended to notify merchants that they’re approaching a compliance violation threshold, so they’re given a chance to reduce their number of disputes.

The VDMP thresholds are as follows:

• Early Warning – kicks in at a dispute count of 75 and a dispute ratio of 0.65%
• Standard – kicks in at a dispute count of 100 and a dispute ratio of 0.9%
• Excessive – kicks in at a dispute count of 1,000 and a dispute ratio of 1.8%

There are three distinct violation stages: 

• On the first month that a merchant passes the threshold for the “Standard” tier of the program, Visa informs the merchant’s acquirer. This is known as the “Notification” phase.
• Visa then states a timeline to resolve the issue and to bring the dispute count and ratio into compliance. This is known as the “Workout” phase, and no financial penalties are imposed during this time.
• The final stage is the “Enforcement” phase, which begins to apply for any months where thresholds are still being exceeded after the end of the “Workout” phase. Businesses in this stage begin to pay fines and may be subject to additional penalties and consequences.

Alongside fines, Visa tends to take an active interest in merchants who are placed in the Visa Dispute Monitoring Program. Some may be required to produce a detailed remediation plan.

It’s important to note that the fines issued to companies under the VDMP are per dispute. Merchants can continue to fight chargebacks via representment. However, once under the VDMP, each chargeback is logged as a dispute, and a fine is issued – whether or not the merchant successfully wins an appeal on a specific chargeback.

How to Check if You’re Compliant with the Visa Dispute Monitoring Program

The easiest way to ascertain if your business is at risk of being placed under the Visa Dispute Monitoring Program is to calculate your chargeback rate.

All you need to do is divide the total number of chargebacks for the previous month by the total number of transactions for that month.

The average chargeback rate across all business sectors is approximately 0.6%. This doesn’t leave a lot of leeway before the “Early Warning” threshold of 0.65%. However, it’s worth noting that a total of over 75 disputes in one month is also required, giving smaller businesses a little less reason to panic.

Being placed on the VDMP can prove both costly and administratively onerous. As such, prevention is always better than cure. It makes sense to have clear visibility on your chargeback ratios so that you can take action before a problem occurs.

Consequences of Entering into the Visa Dispute Monitoring Program

The consequences of entering into the Visa Dispute Monitoring Program can be severe – and in some cases enough to destroy a business. The sanction of last resort is the disqualification of the merchant account. This means no ability to take Visa payments.

Thankfully, there is ample opportunity to rectify the situation before it reaches that stage. That said, once they begin, the fines are punitive.

Once fines start to be incurred, merchants are charged $50 for each dispute. For those over the Standard VDMP threshold, the enforcement phase usually begins after six months. On the Excessive tier, the fines begin on month one.

More serious consequences come into play in month ten (for the “Standard” threshold) or month seven (for “Excessive”). Businesses that don’t rectify their chargeback ratios in these periods, and thereby bring themselves back into compliance, must pay a review fee of $25,000 in order to exit the program.

There are also considerable administrative overheads that come with entering the VDMP. Not only must the business work proactively to reduce the incidence of disputes, but it may also have to commit time to demonstrating its remediation steps to Visa.

How Do You Leave the Visa Dispute Monitoring Program (VDMP)?

The way to exit the VDMP is to reduce disputed transactions to below the threshold levels for a sustained period. Specifically, rates must remain below the threshold for three months in a row.

The clock resets if disputes once again breach the threshold within that period. For example, two months below the threshold, followed by another month where disputes rise again, will mean that three consecutive below-threshold months must once again be achieved.

Timing is of the essence for any business placed under the VDMP. After 12 months on the program, a business becomes eligible for disqualification as a Visa merchant. This means that Visa transactions can no longer be processed – a potentially fatal blow for most modern businesses.

What Is the Visa Fraud Monitoring Program?

The Visa Fraud Monitoring Program (VFMP) applies to businesses around the world. It monitors accounts for fraud and flags up any merchants whose fraud activity levels are too high. Merchants who hit Visa’s fraud monitoring non-compliance thresholds are required to take steps to reduce their instances of fraud.

Note that Visa operates a separate VFMP for businesses in the United States, known as the Visa Fraud Monitoring Program: 3D Secure (VFMP-3DS).

For both programs, Visa uses descriptors to group merchants together. It monitors activity for each descriptor monthly. For any merchants exceeding its thresholds, the VFMP or VFMP-3DS processes kick in.

How Does the Visa Fraud Monitoring Program Work?

Visa monitors merchants’ activity on a monthly basis. It uses a simple formula to calculate those merchants’ fraud ratios. Any merchants with excessive fraud rates are placed into the VFMP, resulting in fines, administrative headaches, and loss of trust. In fact, Visa may automatically assign liability to the merchant in the case of any disputes related to fraud.

The VFMP fraud ratio calculation is based on the amount of fraudulent transactions in USD reported in a given month versus the amount of legitimate ones. Note that “reported transactions” refers to transactions where the issuing bank has notified the card brand that the payment is fraudulent, irrespective of whether a dispute is initiated.

Merchants can (and most certainly should) monitor their own fraud ratios by using the same formula as Visa. They take the amount (in USD) of fraud in any given month and divide it by the amount (in USD) of legitimate sales during the same month. Multiplying the resulting figure by 100 provides the fraud rate percentage. If this is too high, it triggers the Visa Fraud Monitoring Program (minimum dollar amounts also apply, as shown in the thresholds below).

There are two VFMP thresholds: Standard and Excessive. As with the VDMP, there is also an Early Warning threshold, which is there to help any merchants at risk of triggering VFMP processes to take swift remedial action. The thresholds are as follows:

• Early Warning: Visa issues a warning to any business that has a fraud rate of 0.65% and at least $50,000 in total fraud.
• Standard: Visa enrolls merchants whose fraud rate exceeds 0.9% and who have at least $50,000 in total fraud into its Standard program level.
• Excessive: If a merchant hits a fraud rate of 1.8% or higher and has at least $250,000 in total fraud, Visa enrolls it into the Excessive program tier.

The reason for using both the fraud rate and specified fraud amounts for these thresholds is to prevent smaller businesses from suffering.

For businesses in the US that use Visa Secure (3-D Secure), two VFMP-3DS thresholds also apply. These are:

• Early Warning: This kicks in when a merchant using Visa Secure has a fraud rate of 0.5% and at least $5,000 worth of fraudulent transactions.
• Standard: The Standard threshold is met when a merchant has a fraud rate of 0.75% and at least $7,500 worth of fraudulent Visa Secure transactions.

Merchants should carefully monitor their fraud ratios and ensure that they take action before they reach any of the above thresholds and enter the VFMP or VFMP-3DS. Doing so can help to avoid the financial penalties associated with these programs.

How to Check if You’re Compliant with the Visa Fraud Monitoring Program (VFMP)

Businesses can check they are compliant with the VFMP – i.e., they are under the defined thresholds – by monitoring their fraud ratio in-house on a monthly basis. The fraud ratio calculation (which, to reiterate, is the amount of fraud divided by the amount of legitimate sales, multiplied by 100) can achieve this.

Where a business is approaching a VFMP threshold, it should take steps to ensure that it remains below that threshold. Implementing robust onboarding with user activity monitoring and KYC verification processes is key to this. Doing so can stop fraudsters in their tracks before their actions have a negative impact on the business in question.

Consequences of Entering into the Visa Fraud Monitoring Program

Entering into the Visa Fraud Monitoring Program can be costly. While businesses at the early warning stage won’t be fined, once they reach the Standard threshold, the clock starts ticking. Businesses have four months to ensure compliance before fees kick in, with those fees increasing based on how long the merchant has been in the VFMP.

The fines that merchants can face under the VFMP are:

Months in VFMP (Standard)	Fine
One to four	None
Five to six	$25,000
Seven to nine	$50,000
Ten or more	$75,000

For merchants who reach the Excessive threshold, fines kick in immediately:

Months in VFMP (Excessive)	Fine
One to three	$10,000
Four to six	$25,000
Seven to nine	$50,000
Ten or more	$75,000

There are also administrative consequences when businesses need to divert resources away from everyday operations in order to satisfy their obligations under the VFMP.

As with the VDMP, Visa reserves the right to withdraw any merchant’s ability to process Visa payments after they have been in the VFMP for 12 months.

How Do You Leave the Visa Fraud Monitoring Program (VFMP)?

Leaving the VFMP requires a business to drop below Visa’s Standard threshold (0.9%) for three consecutive months. Any breach of the threshold within those three months means the business needs to start over.

Visa may also require some businesses to provide details of their plans and progress towards dropping below the Standard threshold. This can include information on the steps the business is taking and the overall timeline for the implementation and impact of the remedial work. This can place additional stress on businesses that are attempting to leave the Visa Fraud Monitoring Program, by draining operational resources.

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