Excessive fraud activity in your transactions will cost you plenty—up to $75,000 per month or more, just in fines.
This doesn’t count your loss of revenue due to the fraud.
If your transactions exceed a certain level of fraud, Visa enrols you into the Visa Fraud Monitoring Program (VFMP). The longer you’re in it, the more expensive it gets.
VFMP is meant to help you. But, after a certain amount of time, Visa stops giving you the benefit of the doubt.
The point is to help you reduce fraud. If you don’t, you pay. Or worse.
How is the VFMP Different from the VDMP?
Visa has two distinct monitoring programs.
- Visa Fraud Monitoring Program (VFMP)
- Visa Dispute Monitoring Program (VDMP)
Each program targets a different aspect of transaction security and integrity.
The primary differences between the two are as follows.
Visa Fraud Monitoring Program
The Visa Fraud Monitoring Program (VFMP) aims to identify and incentivise merchants with high rates of fraudulent transactions to address the issue.
Visa Dispute Monitoring Program
The VDMP monitors the rate of disputes involving Visa transactions at merchant outlets.
Disputes arise from unauthorised card use, processing errors, dissatisfaction with the purchased goods or services, and more.
VDMP’s purpose is to manage and reduce disputes and chargebacks between cardholders and merchants.
We’ll discuss the VFMP in detail in this article.
Let’s begin with the calculation of fraud levels.
VFMP Fraud Rate Calculation
If your Visa calculated rate of fraud is over a certain threshold, you are entered into the VFMP.
The calculation goes like this.
The Fraud Rate is the ratio of the value of fraudulent Visa transactions to all Visa transactions over a specified period of time.
Fraud Rate = ( Total Value of Fraudulent Transactions / Total Value of All Transactions ) × 100
Total Value of Fraudulent Transactions refers to the combined value of all transactions identified as fraudulent during the specified period.
Total Value of All Transactions is the sum of all transactions processed during the same period, including both legitimate and fraudulent transactions.
This formula expresses your fraud rate as a percentage.
If a merchant has $5,000 in fraudulent transactions and a total of $500,000 for all transactions in a month, the fraud rate would be calculated as follows:
Fraud Rate = ( 5,000 / 500,000 ) × 100 = 1%
This means that 1% of the merchant's transactions, by value, were fraudulent for that month.
The Fraud Rate determines your entry into the Visa Fraud Monitoring Program.
Entering the VFMP
Based on Visa’s analysis and fraud rate calculation, you are subject to four phases of the VFMP: the monitoring phase, early warning phase, identification phase (Standard level), and non-compliance phase (Excessive level).
While your fraud rate remains below 0.65%, you receive no warnings. Visa just keeps watching. Every month.
Early Warning Phase
If you reach a fraud rate of 0.65% with a volume of at least $50,000 in total fraud, you begin to get warnings from Visa about this elevated fraud rate. No action is taken against you, and you are not yet enrolled in the program. But you’ve been warned.
Identification Phase (Standard)
You enter the Standard identification phase with a fraud rate of at least 0.9% and at least $75,000 in total fraud. At this point, you are now identified as having Standard fraud rates.
The VFMP provides monetary incentives to bring your fraud rate down. You pay these fees each month you are in the program.
Standard Non-Compliance Assessments by Months
Months in Program - Non-Compliance Fee (USD)
1-4 - None
5-6 - $25,000
7-9 - $50,000
10+ - $75,000
Non-Compliance Phase (Excessive)
A fraud rate of 1.8% and a total fraud amount of $250,000 lands the merchant at the Excessive fraud level. Fines begin immediately and are assessed monthly. Additional requirements may be assigned.
These measures are intended to encourage rapid compliance and improvement in fraud management practices. They tend to work.
Excessive Non-Compliance Assessments by Months
Months in Program - Non-Compliance Fee (USD)
1-3 - $10,000
4-6 - $25,000
7-9 - $50,000
10+ - $75,000+
Review and Resolution Phase
There is a final phase I haven’t mentioned. In this phase, you are judged on whether you have taken steps to address the issues and reduce your fraud rate.
If you reduce fraud to acceptable levels, you exit the VFMP process.
If you don’t reduce your fraud rate, further actions may be taken (they probably will be). Actions include paying sustained fines or even the termination of your ability to accept Visa cards.
Your business may fold under this pressure.
Exiting the VFMP
As I said, if you bring your level of fraud down to below 0.65%, you’re good to go. You’re out of the program and back to merely being monitored.
However, exiting the VFMP is not just about crossing a numerical threshold. It often requires a sustained commitment to better security practices and fraud prevention strategies.
There are ways to get help exiting the VFMP. In fact, you can avoid getting into this program in the first place.
ChargebackStop.com offers a platform that can identify and help prevent fraud while reducing chargebacks by up to 99%. Yes, we mean it.
ChargebackStop’s platform provides transaction alerts and screening services after a purchase is made. You click to take the proper measures when you receive automated notifications and actionable recommendations from CBStop. It is fast and effective, protecting your revenues and your company’s reputation.
Visit ChargebackStop.com to learn more about fraud prevention, talk to our brilliant customer service staff, and get a free demo of our platform.
We’re happy to answer your questions and show you how it all works. Just give us a visit.
FAQ: Visa Fraud Monitoring Program (VFMP)
How does VFMP identify potential fraud?
Potential fraud is identified through complex algorithms and criteria that assess online transactions. The transactions are analysed monthly and look for divergent or unusual patterns. A Fraud Rate is calculated. If the merchant has exceeded a set threshold of fraudulent activity, they enter the VFMP to reduce the Fraud Rate.
What happens if a merchant exceeds VFMP thresholds?
Merchants exceeding the thresholds may face serious consequences, including being placed in different levels of the program (Standard or Excessive) and potentially incurring steep fines (up to $75,000 and more) with additional scrutiny.
How can merchants avoid getting into VFMP?
Merchants can avoid VFMP by implementing strong fraud prevention measures, monitoring their transactions carefully, and maintaining a low rate of fraudulent transactions. ChargebackStop.com is a good example of a platform that provides this service.
How can merchants exit the VFMP?
To exit VFMP, merchants must reduce their fraud levels below the specified thresholds and maintain them for a defined period, typically three consecutive months.