How to keep chargebacks at a manageable level?

Visa and Mastercard Excessive Chargeback Program

As part of your financial obligations to the card networks, you must ensure that disputes (also called chargebacks) and fraud are kept at acceptable levels. If these exceed the thresholds dictated by each network (Visa, Mastercard, China Union Pay), they place you into one of their monitoring programs. As part of a program, you can incur monthly fines and additional fees until you reduce your dispute or fraud levels in a substantial way.

Here are some general guidelines for chargeback ratios:

Chargeback Ratio:

The chargeback ratio is the number of chargebacks divided by the total number of transactions processed by a merchant for each card association. Visa and Mastercard have set the chargeback ratio threshold to 1% for merchants, meaning that merchants should aim to keep their chargebacks below 1%, the most acceptable rate is typically 0.75%.

Monthly Chargeback Threshold:

In addition to the chargeback ratio, Visa and Mastercard have established a monthly chargeback threshold for merchants. This threshold is set at 100 chargebacks per month for each merchant account. If a merchant exceeds this threshold, you may be flagged for excessive chargebacks.

Monitoring Period:

Both card associations use a rolling four-month period to identify excessive chargebacks.

Penalties:

Both card associations may apply penalty fines for continued excessive chargebacks above the above thresholds.

Remediation Plan:

Both card associations may require Nomupay and our merchant customers to submit a plan to outline how excessive chargebacks may be reduced.

Monitoring of Dispute Condition 10.4:
Other Fraud—Card-Absent Environment Remedy Rule

Overview: Effective 1 May 2023, Visa will begin monitoring merchant-provided qualification data for the Dispute Condition 10.4: Other Fraud—Card-Absent Environment remedy rule to identify acquirers and merchants that provide invalid or falsified qualification data.

Data Elements Required:

IP address:

• Must be the cardholder’s public IP address
• Must be in clear text and must not be hashed
• Must meet prevalent industry formats, which are currently IPV4 and IPV6

Device ID:

• Must be a unique identifier of the cardholder’s device, such as a device serial number (e.g., International Mobile Equipment Identity [IMEI])
• Must be at least 15 characters

Device fingerprint:

• Must be a unique identifier of the cardholder’s device
• Must be at least 20 characters
• Can be derived from a combination of at least two hardware and software attributes such as the operating system and its version or device model, etc.

Account ID:

• Must be a unique identifier that the cardholder uses to authenticate themselves on the merchant’s e-commerce site or application
• Must be a value that the cardholder recognizes

Shipping address:

• Must be the cardholder’s full shipping address, including the street address, city, state/province/region (if applicable in the cardholder's country), postal code and country
• Must be in clear text and must not be hashed