Starting from January 1st 2016 Visa will enforce new chargeback regulations in order to streamline the method of evaluating merchants. The new regulation adheres to the thresholds, timelines and fees.
The New Program
Until the end of 2015 there were three Visa chargeback programs:
- The Global Merchant Chargeback Monitoring Program
- U.S Merchant Chargeback Monitoring Program
- High Brand Risk Chargeback Monitoring Program
These programs has been replaced by a single, unified program from January 2016 onwards, known as the Visa Chargeback Monitoring Program
Visa is also planning to implement a single fraud monitoring program called the Visa Fraud Monitoring Program.
Visa Chargeback Monitoring Program thresholds.
Previously each program had its own chargeback thresholds one for U.S. accounts and one for international accounts, this will change with the Visa Chargeback Monitoring Program. To enter the Global Merchant Chargeback Monitoring Program, a merchant would have had to have either:
- Over 200 International Chargebacks
- Chargeback to sales ratio over 2%.
Only one threshold had to be reached in order for a merchant to be placed in the monitoring program. U.S. Merchants were placed in the U.S. Merchant Chargeback Monitoring Program if they had more than:
- 100 Chargebacks per month,
- Chargeback to sales ratio over 1%.
NEW Visa Chargeback Monitoring Program has set three thresholds and will impose fees to merchants that reach the thresholds
- Early Warning Threshold
- Chargeback to sales ratio is over 0.75%
- Chargeback count 75
- – No Fees –
- Standard Threshold
- Ratio over 1%
- Chargeback count 100
- Month 1-4: No fees,
- Month 5-7: $50 per CB,
- Month 8-9: $100 per CB & $25k review fee
- Excessive Threshold
- Chargeback to sales ratio is over 2%
- Chargeback count 500
- Month 1-6: $100 per Chargeback
- Month 7-12: $100 per Chargeback and $25,000 review fee
New timeline phases
- An early warning is provided if the chargeback and fraud rates increase steadily, also seen in the Early Warning Thresholds
- Once the thresholds have been breached, Visa will officially send a Notification to the acquirer. The acquirers responsibility is to notify the merchant, review merchants history and enforce new mitigations plans in order to lower chargeback ratio and count.
- The work out period from months 2 to 4 is intended for merchants mitigation plan. If the merchant is still unable to lower the chargeback ratio or count fees will be imposed from month 5 onward.
Leaving the monitoring program
If the merchant is able to stay below the fraud and chargeback thresholds for three consecutive months they will nil the fees during those three months, and the monitoring process will be over for the merchant.
With these new regulation changes, Visa has created a new tool to combat fraud and chargebacks, however only time will tell how the new regulations will affect acquirers, merchants and the CNP market in general.