Visa Dispute Monitoring Program Guide for Beginners

One of my worst fears as an online seller was being placed in the VDMP. To prevent this, I needed to know this program inside and out.

That’s my goal with this post. To help you understand what VDMP is, why it’s bad, and how to prevent yourself from being placed in it.

Let’s deal with this.

Key Takeaways

• Less than 5% of merchants have entered VDMP, and 1% in VFMP.
• Keep your chargeback rate under ~0.90% to avoid being placed in this program.
• Consequences of being in this program include $50 dispute fees, $25,000+ review fines, and termination of access to Visa.
• Visa refers to “disputes” and “chargebacks” as the same thing.
• Visa has a separate monitoring program for fraud-related disputes.
• If you want help getting out of the VDMP, book a call with us here. 

What Is the Visa Dispute Monitoring Program?

The Visa Dispute Monitoring Program (VDMP) tracks chargebacks. Merchants join if their monthly disputes exceed Visa's thresholds, calculated by dispute count and rate. This also forces remediation measures, fees, and fines until sellers fix their dispute rates.

This system serves 2 goals for Visa:

• Implement plans to lower chargeback rates.
• Find merchants with too many disputes.

Some reports suggest that Visa has placed fewer than 5% of merchants in VDMP [1].

Here are tidbits.

I didn’t have enough information to shove in dedicated sections:

VDMP monitoring includes domestic and international transactions from acquirers in these areas:

• United States
• Australia
• Canada
• Europe: United Kingdom, France, and Germany
• Brazil

Is your country not listed above?

VDMP will only include international transactions from those regions.

International and domestic transactions have different meanings in this context:

• International: Card issuer isn’t located in the same country you are.
• Domestic: Issuer is located in your country.

The program doesn’t include the chargeback reason code 10.5 (Visa Fraud Monitoring Program). It will include every other reason code, though.

This was known as the Visa Chargeback Monitoring Program (VCMP) before October 1st, 2019.

This program sounds amazing (not really).

How do you get placed in it?

Summary: The program penalizes businesses that exceed Visa’s dispute thresholds with fines.

Visa Dispute Monitoring Program Thresholds

The thresholds to enter the VDMP are as follows:

Notes:

• Chargeback Rate: Percentage of disputes compared to total transactions.
• Dispute Count: Number of disputes.
  • These apply to every Visa chargeback reason code except 10.5.

The thresholds were more forgiving prior to October 1st, 2019:

• Early Warning: 0.75%
• Standard: 1%
• Excessive: 2%

Previous rates don’t matter anymore. However. They can help us identify a trend of a lower threshold.

Anyway:

Let’s break each of these down:

1. Early Warning.

This slap on the wrist warns you to reduce your chargeback rate.

This tier doesn’t come with any fees or consequences.

It’s Visa telling you to fix your dispute rates before reaching the Standard threshold.

Let’s say you broke that threshold…

2. Standard.

The Standard timeline means that you’ve reached or exceeded the dispute correlating threshold (0.90%).

You also do not have a high-risk Merchant Category Code (MCC).

You have several months to get your dispute rate below the threshold before you start receiving fines.

Think of this as crossing Visa’s red line.

You won’t want to cross this line and have a high-risk merchant category code.

3. High Risk.

Visa moved you from the Standard timeline and deemed you as a “High-Risk MCC.”

The following Merchant Category Codes (MCC) for specific Card-Absent transactions are considered (high-risk):

• 6051 / Non-Financial Institutions: You sell or fund cryptocurrency.
• 5816 / Digital Goods – Games: Think fantasy sports or other skilled game wagering.
• 4816 / Information Services: Remote file-sharing services, or you sell access to cyberlockers.

They’ll consider all Card-Absent orders under these codes as high-risk:

• 5993 / Cigar Stores.
• 5912 / Pharmacies
• 5122 / Drugs
• 7995 / Betting
• 7273 / Escort and dating services
• 5967 / Inbound Telemarketers
• 5962 / Travel-Related Arrangement Services
• 5966 / Outbound Telemarketers

The following MCCs will only apply to domestic transactions in the Canada, CEMEA, Australia, Europe, and Brazil areas:

• 5122
• 5993
• 5912

By the way, CEMEA means Central Europe, Eastern Europe, Middle East, and Africa.

It’ll take you a lot of chargebacks to reach the next tier.

4. Excessive.

You’ll enter this tier if you have over 1,000 disputes and a 1.8% dispute rate.

What happens if you lower your rate to 0.90% while in this tier?

Nothing.

They won’t downgrade you to the Standard timeline.

Visa will keep you in this program until you lower your chargeback rate below 0.90%.

How to Calculate This Rate

Visa will calculate dispute-to-sales rates based on orders in the previous calendar month.

And the formula is as follows:

• Number of disputes during a month divided by;
• The number of sales in the same month.

Here’s what that’ll look like:

The program will only include the first 10 disputes between you and a single account in a month.

What does that mean?

If you have 15 disputes with the same shopper in a month, the first 10 will be counted toward your VDMP score. The remaining 5 disputes won't affect your rate.

What happens if you’re in any of these tiers?

Consequences of VDMP

The non-compliance fines for being in the VDMP Standard Tier are:

As you can see, Visa will not fine you for the first several months of the program.

From month 5 and on, you can think of the $50 fines as MUCH higher chargeback fees.

If your chargeback rates aren't fixed by month 10, you’ll pay the $50 dispute fees AND a review fee.

The review fee is charged to merchants who don't follow the program's rules for too long.

If a seller can't reduce their chargebacks enough, they might have to pay this fee.

In addition to the review fee, you’ll need to have an audit done (at your expense). This will find faults in your business and potentially reduce chargeback rates.

Folks in the EU don’t need to have this audit done.

And here are the non-compliance costs when placed in the Excessive tier:

You’ll immediately pay higher chargeback fees when placed in the Excessive Timeline.

What happens after being in the Excessive and Standard tiers for 12 months? There’s the potential for Visa to disqualify you from being able to process Visa cards.

Visa may waive these fines in certain circumstances.

We’ll talk about these now.

Summary: Folks in the Standard tier pay nothing for the first 4 months. After which, they’ll pay $50 per dispute and possibly a $25,000 review fee. Those in the Excessive tier immediately start paying these costs.

What Is a Remediation Plan?

The remediation plan is a strategy to regain compliance. It involves a detailed plan submitted by the acquirer on behalf of the merchant. The goal is to seek a suspension or waiver of non-compliance fines.

You can only appeal to a fine if you have new information to share that wasn’t in a prior remediation plan.

You’ll also need to pay a $5,000 fee and file it within 30 days of the date Visa imposes the fine.

Follow these tips to write this plan:

• Identify and describe the root causes of non-compliance.
  • Explain why the issues occurred.
• Detail the actions taken to fix the problems. Show that the situation is under control.
• Set milestones for each corrective action. Include deadlines for each milestone.
• Ensure the milestones align with Visa’s expectations. Keep all timelines realistic.

Visa may approve or deny the suspension request.

Approval is at Visa's sole discretion.

Even if approved, fines may accumulate during the suspension. If you fail to stay compliant during this period, the fines may apply after suspension.

Submit your plan with all these elements included.

Keep your explanations concise and direct.

This approach will help in making a strong case for suspension or waiver.

Be clear, be precise, and follow through on all commitments outlined in your plan.

You’ll probably want to know how to get out of the program…

Summary: Submit a remediation plan detailing causes, corrective actions, and milestones to seek compliance suspension.

How to Get out of VDMP

You must keep your dispute rate below the Standard threshold (0.9%) for 3 consecutive months. 

This applies to all tiers.

For instance, Visa would take you out of the Standard and Excessive tiers if you maintain an acceptable chargeback rate.

However:

If you were good for 2 months, then breached the 0.9% threshold the third month, the 3-month timer would restart.

This is where we can help. Getting merchants out of the VDMP is our speciality. Chargeback.io can reduce your chargebacks by 91% in 24 hours. 

To see if we are a good fit, you can book a call here. 

Now that you know about both programs, how are they different?

What Is the Visa Fraud Monitoring Program?

The Visa Fraud Monitoring Program (VFMP) targets merchants with high fraud rates. These merchants must lower fraud or face fines and possible removal from Visa.

Visa has placed less than 1% of sellers in VFMP [1].

This is extremely low because a merchant would need to process around $10 million a month before being at risk.

Anyway:

Visa calculates fraud by using early fraud warnings (EFW) from TC40 reports. More on this in a moment.

Here are the thresholds when Visa would place you in this program:

Here are some tidbits:

• Fraud Amount: USD volume of EFWs
• Fraud Rate: Amount of money lost to fraud compared to the money paid.

Let’s check out the non-compliance fees:

There’s one aspect factor that many folks don’t talk about.

Customer banks issue TC40 reports to card brands whenever any fraud happens. This includes small dollar amounts.

For instance, a thief might be trying to test a stolen card to ensure it’s working.

Banks will usually reimburse these small amounts and not let the merchant know. From there, they’ll submit the report to card networks like Visa.

That means if a lot of scenarios like this happened, you could find yourself a part of VFMP without any chargebacks.

Though, that would require A LOT of these small orders.

You can’t access TC40 reports unless you were to contact the customer’s issuing bank.

I explain how to do this in a separate piece.

They’ll then add the fraud claims to your Risk Identification Service (RIS). This helps Visa identify whether you’re high risk.

To exit VFMP, keep your fraud dispute rates at 0.65% for 3 consecutive months.

There are a couple mutations of this monitoring program.

Let’s check out the first one.

Summary: The Visa Fraud Monitoring Program results in fines if merchants have too high of a fraud rate and amount.

What is VFMP 3DS?

Visa Fraud Monitoring Program 3DS is the same as the regular VFMP, but only applies to US businesses who use Visa Secure.

Visa Secure is their version of 3D Secure.

This program has different thresholds:

Notes:

• Fraud Amount: USD volume for Visa 3D Secure-authenticated payments
• Fraud Rate: Money lost to fraud on Visa 3DS-authenticated payments compared to the money paid

VFMP 3DS has a much lower barrier to entry because merchants should be more secure from this program. Thus, Visa has a lower tolerance.

However.

3D Secure has resulted in a 82% reduction in criminal fraud [2]. Though, it has led to a 66% increase in first-party fraud chargebacks (friendly fraud).

This isn’t a guide about 3D Secure, though.

You’ll need to read the source link for more information.

There’s one more fraud monitoring program to talk about.

Summary: VFMP 3DS has a lower threshold before starting to receive fines.

What Is Visa Fraud Monitoring Program for Digital Goods Merchants?

The Visa Digital Goods Merchant Fraud Monitoring Program (DGMFM) is a version of VFMP for digital goods merchants.

It monitors fraud like VFMP but has stricter rules.

Digital goods have higher fraud risk, so thresholds are lower.

Merchants face non-compliance sooner in DGMFM than in VFMP.

And here are those thresholds:

DGMFM applies to the following MCCs:

• 5735: Record Stores
• 5815: Books, Movies, Digital artwork, and Music
• 5816: Games
• 5817: Applications (Not Games)
• 5818: Large Digital Goods Merchant

Here are all the fees to expect from this program:

Screenshot from Stripe.

Now we know about VDMP and VFMP.

How are they different?

Summary: DGMFM applies to digital products and has similar consequences to VFMP.

VDMP vs. VFMP

VFMP targets fraud prevention by identifying high-risk merchants to reduce fraud. VDMP focuses on helping merchants handle chargebacks. VFMP uses fraud dollar amounts. VDMP considers dispute-to-transaction ratios. Both programs aim to reduce financial risks.

VFMP will focus on data from early fraud warnings from TC40 reports. EFWs from TC40 reports can include transactions that weren’t disputes.

VDMP will gather data only from disputed charges.

Thus, chargebacks of any type will contribute toward your VDMP threshold.

Otherwise:

The differences lie in the fees. I’m not going to type these out again.

How would you avoid getting placed in either program?

We’ll discuss that now.

Summary: VFMP focuses on fraud, even if it doesn't lead to a dispute. VDMP deals with chargebacks of all types.

How to Avoid Getting Placed In VDMP?

The obvious way to avoid being placed in VDMP is to keep your chargeback rate low. This involves doing your best to prevent all types of chargebacks from happening.

Examples of preventative measures you could use include:

1. Chargeback alerts.

These let merchants know when a customer has an issue with most transactions. Giving them a chance to issue a refund before the issue escalates.

This preventative measure works best for higher-margin industries like SaaS. As all alert providers charge per alert.

If you sold $1 products and paid $15 for Visa Rapid Resolution alerts, you’d go broke.

There’s a caveat, though.

If you were creeping up on the Standard threshold, you’d need to consider alerts no matter your business type. Once Visa places you in VDMP, you’ll be paying a lot of money.

The alert providers are:

• RDR: Visa
• CDRN: Visa and other card networks
• Ethoca: Mastercard and other card networks

Card brand coverage will vary by alert provider.

However:

Enrolling in these alerts can take a lot of time.

Going with a chargeback alert service can help fix this issue and save you time and money.

We offer such a service. See how we can help.

2. Fraud Prevention

1% of transactions are fraud. This fraud can cost you a lot of money — and customer trust.

Your focus is to ensure the cardholder is who they say they are.

Thus, you’ll need to focus on methods like:

• Address Verification Service (AVS): Verifies the customer’s address.
• 3D Secure: Additional steps the customer takes before making a purchase.
  • Think of this like 2-factor authentication.
• Fraud flagging software: Uses data to determine whether orders are suspicious.
• CVV verification: Requires the number on the back of customer’s cards.
• Social engineering checks: Verify customer information through additional questions or challenges.

Using secure payment gateways also helps.

For instance, some businesses that accepted and encouraged the use of Apple Pay noticed a 25% chargeback reduction [3].

That’s likely because these wallets require biometrics to make a purchase. Adding another layer of security. And another barrier a fraudster has to get through.

3. Fix issues within your business.

Some chargebacks come from mistakes that your business has made.

Such issues you could address include:

• Incorrect shipping information: Verify customer addresses before shipping.
• Product misrepresentation: Ensure product descriptions and images accurately reflect the items.
• Late or incorrect deliveries: Ship orders on time and accurately to avoid customer dissatisfaction.
• Unclear or confusing terms of service: Make terms of service easy to understand.
• Unauthorized charges: Avoid charging shoppers additional fees without their consent.
• Incorrect refunds: Process refunds accurately and quickly.
• Poor customer service: Respond to customer inquiries and complaints in a timely manner.
• Technical issues: Ensure your website and payment systems are functioning properly.
• Lack of transparency: Be open and honest with customers about your policies and procedures.

And the last main point.

4. Consider help.

If you’ve tried the above options and still cannot lower your rates, you’ll need to opt for chargeback management software.

Services like Chargeflow can help you build representment packages to increase your odds of winning chargebacks. And you’ll only pay if you win a dispute.

If you win, the dispute doesn’t go toward your chargeback rate. And merchants typically win around 30% of disputes (across all industries).

Such a service is nice for e-commerce stores with smaller transaction values.

Or you could opt for all-in-one providers like Signifyd. These come with fraud protection, chargeback management, and more.

However.

The pricing is much higher and useful for larger businesses.

In that case, businesses of all sizes and companies might be better off hiring a chargeback analyst.

They’ll analyze your chargeback history and find weak points. From there, they could use that data to help you lower your dispute rates.

We have a guide that provides more in-depth preventative measures for folks in all industries.

If you’re a SaaS business, you might find this guide useful to help you avoid chargebacks.

I’ve been blabbering about disputes and haven’t talked about how Visa handles them.

Let’s change that.

How Does Visa Handle Disputes?

• How Long They Take: 30 or more days
• Chargeback Fee: $10 – $20 per dispute

When a dispute happens with Visa, you’ll go through the following process:

1. Cardholder starts dispute: Cardholder contacts their issuing bank to dispute a charge.
2. Issuer reviews dispute: Bank reviews the dispute and may request evidence from the merchant.
3. Seller provides evidence: Merchant submits evidence to support the transaction if requested.
4. Issuer makes decision: Bank decides whether to:
   1. Reverse the charge (chargeback); or
   2. Uphold the transaction.
5. Merchant may appeal: If the charge is reversed, the business may appeal the decision.
6. Arbitration (if necessary): If the appeal is unsuccessful, the dispute may go to arbitration.

We have a much longer guide that goes deeper into this area.

I don’t have enough room in this guide to include this information.

Do Other Card Networks Have Monitoring Programs?

Mastercard has these programs:

• Excessive Chargeback Merchant (ECM): 150 – 299 BP
• High Excessive Chargeback Merchant (HECM): 300+ BP

They’ll use basis points (BP) to determine which program you’re in.

Calculate basis points by:

• Dividing the number of chargebacks in a month by the number of sales in the previous month, then
• Multiply by 10,000.

First off, there are the fines, which range from $1,000 to $100,000.

You'll pay an additional monthly fine each month you’re in the program. These fines increase each month.

If you’re in the HECM tier, you’ll also need to pay an issuer recovery assessment if you’re in the program for 4 or more months.

This tacks an additional $5 to every dispute.

That means you’ll pay your chargeback fee plus the issuer recovery assessment.

If you were to have 100 chargebacks, you’d pay $500 — without considering dispute fees and other costs.

Discover doesn’t have a specific monitoring program.

They will label you as high risk if you reach a specific chargeback rate (that’s unspecified).

In this scenario, they may impose fines or monitor your transactions.

American Express has a couple chargeback programs:

• Immediate Chargeback Program: Skips the inquiry process.
• Partial Immediate Chargeback Program: Skips the inquiry process on orders below a threshold.

AMEX will place you in either if you have a 1% or higher chargeback rate for 3 consecutive months.

These aren’t as severe as Visa or Mastercard’s programs.

They don’t allow merchants to go through an inquiry phase. And instead straight to a chargeback.

An inquiry is when American Express requests information and doesn’t immediately do a chargeback.

And that’s it for the major card providers.

FAQs

What Happens if You Exceed VFMP & VDMP Thresholds Simultaneously?

If you exceed VFMP and VDMP thresholds in the same month, you’d pay assessments for VDMP instead of VFMP.

Conclusion

VDMP and VFMP are scary programs. Though, less than 5% of merchants enter either. They result in much higher chargeback fees and massive fines.

5% of merchants is still a decent number of sellers. Thus, you should focus on prevention NOW.

And we can help you with chargeback alerts. We’ve helped reduce some businesses dispute rates by up to 91%. Learn how.

Sources

• [1] VFMP. Chargeblast. 4/16/2024.
• [2] 3D Secure authenticator. Signifyd. 4/24/2024.
• [3] Avoid payment chargebacks. Stax.