Late last year, Visa announced that any acquirer who meets or exceeds the VAMP monthly thresholds for either excessive CardAbsent Environment Disputes or excessive Card-Absent Environment Fraud Activity will be placed into Visa VAMP.
What is Visa VAMP? The Visa Acquirer Monitoring Program (VAMP), is a program to identify acquirers who generate excessive disputes or fraud. To be clear, this isn’t a program anyone wants to join. At the standard level, fines starting at $25,000 may be assessed after four months and at the excessive level fines may be assessed immediately.
VAMP Monthly Thresholds
Dispute monitoring:
750 Dispute count of all reported Disputes
1% ratio of Disputes-to-sales Transaction count
Fraud Activity monitoring:
USD 500,000 fraud dollar amount of all reported fraud
1% ratio of fraud-dollar-to-sales-dollar amount
In the US Region: For domestic Visa Secure Fraud Activity monitoring, both:
USD 100,000 fraud dollar amount
0.75% ratio of fraud-dollar-to-sales-dollar amount
How Does This Work with 3-D Secure?
As many of you may know, 3DS shifts the fraud liability off of the merchant account - Which is great for merchants, but as an acquirer you are not off the hook. Visa is paying careful attention to acquirer fraud-to-sales ratios.
In recent conversations with Acquirers, the VAMP rules have been a recurring topic of conversation as they are being warned of excessive fraud and impending fines on their Visa Secure (3DS) transactions. To some acquirers, this comes as a surprise since they have made no changes to their merchant base and are surprised to see the fraud push them over the limits for 3DS transactions while the rest of their portfolio remains in compliance.
We are frequently asked, “As an acquirer, what can I do to keep my ratios in check and avoid VAMP?”
Answer:
This is a great opportunity to help low risk merchants improve their authorization rates as well as avoid friendly fraud related chargebacks. By enabling all of your portfolio with 3DS your merchants get these benefits while ensuring the low risk merchants keep you within the ratio limits set by Visa.
For many acquirers, their initial reaction is to turn off 3DS for their portfolio so that they can bring their “high risk” transactions back into the general pool to be diluted by the rest of the portfolio, thus avoiding VAMP and the associated fines. This is the wrong approach. The negative impact for the merchants would hurt the portfolio in a much more significant manner. MIDs would start to see excessive Card-Absent fraud causing the need to keep higher reserves which means this is less operating capital, additionally the business would be hurt by the fees and cost associated with all the chargebacks that would now be the merchant's responsibility. Inevitably, the MID will be shut down as the chargebacks climb. For the acquirer, this decreases the LTV of a MID significantly and will cost considerably more than any VAMP fine.
3DS has become more and more prevalent over recent years, however many acquirers are only recommending that merchants considered very high risk take advantage of its benefits. Therefore as more and more of these merchants start to utilize 3DS to protect themselves, it leaves the acquirer vulnerable unless the 3DS portfolio is balanced with lower risk merchants.
The Winning Strategy
Turn on 3DS for all e-commerce merchants. Every merchant benefits from 3DS by seeing an increase in approvals and increasing their top-line revenue. On top of that, shifting the liability for fraudulent transactions to the issuing bank helps keep fraud ratios low, lowers reserves, and allows a business to handle more transactions. For the acquirer, having all e-commerce merchants enrolled in 3DS allows the portfolio to balance out and keep the 3DS transactions at a fraud level below the VAMP limits. It is a win-win solution.