With the rise of global e-commerce,international credit card payments have become one of the primary methods for cross-border transactions.However,along with this comes payment risks.Chargebacks and fraud are two unavoidable issues in international payments,and they are major concerns for businesses besides authorization rates,as they are related to financial content and can cause losses for businesses.

To help merchants strengthen risk control,minimize the adverse impact of chargebacks and fraud on the payment ecosystem,and improve consumer payment experiences.Visa has recently upgraded its merchant monitoring program.This update will significantly impact all parties involved in international payments,especially merchants,who need to understand the potential impacts of the latest industry rules on their operations.

Chargebacks,also known as Dispute,are a rule-based mechanism with operational time limits,allowing issuing and acquiring banks to determine financial responsibility for a disputed transaction.Cardholders have the right to dispute a transaction,and the issuing bank initiates the chargeback process based on the nature of the dispute.The acquiring bank and merchant receive the chargeback notification,and the transaction funds are temporarily moved by the card network to the issuing bank.Common chargeback scenarios can be categorized into four main types,each with specific dispute reasons(which may vary by channel or card network):

Fraud in transactions refers to unauthorized or illegal activities involving financial transactions.When someone uses another person's payment information (e.g., credit card or debit card details) without permission to make purchases, withdraw funds, or engage in other financial activities, fraud occurs. Fraudsters use various methods, such as hacking, theft, social engineering, and malware, to obtain the necessary information for these fraudulent activities. Transaction fraud can result in significant financial losses for consumers and merchants, as well as damage credit scores and reputations.

Additionally, there is a type of moral hazard fraud that should not be overlooked. When cardholders dispute legitimate transactions they participated in, this is known as "First-party Fraud" or "Friendly Fraud". Unlike third-party fraud, where criminals steal the cardholder's identity to make purchases for personal gain,first-party fraud can sometimes be unintentional:cardholders may forget about a purchase or be confused by a merchant's unfamiliar billing name. In other cases, cardholders may be unaware that their children used their card without permission. Studies show that such disputes account for 75% of online fraud-related disputes and often result in chargebacks.

Fraud transaction statistics are derived from international card network'Fraud Reports(Visa calls it TC40).When customers file fraud claims,their issuing bank generates fraud transaction data and sends it to the card network,which is then accessed by acquiring banks through the card network.

Visa has significantly updated its monitoring rules for chargebacks and fraud indicators,with changes scheduled to take effect in April 2025.

1.Visa will integrate the VAMP,VFMP,and VDMP programs into a single program and adopt new monitoring indicators.Currently,Visa monitors merchants through three separate programs but plans to consolidate these into the VAMP program to monitor acquiring banks and merchants:

Simplifying Visa's monitoring programs makes it easier for acquiring banks and merchants to understand the rules, helping them manage risks more effectively. This change also reflects Visa's goal to improve efficiency and reduce costs.

2.Visa has updated the monitoring indicators to integrate both fraud and non-fraud chargebacks.The current three programs have different monitoring indicators,creating complexity.The upgraded consolidated program will focus on a single comprehensive indicator.

During the transition period(April 1,2025,to December 31,2025),merchants' VAMP Ratio must not exceed 1.5% monthly, and starting January 1, 2026, it must not exceed 0.9% monthly. Additionally, the combined number of fraud transactions and non-fraud chargebacks must not exceed 1,000 per month.

Visa's new VAMP Ratio,which combines both fraud and chargeback elements,is a smart and innovative approach.The previous VDMP focused solely on chargeback indicators,while VFMP focused on fraud indicators,which could be somewhat one-sided.Fraud-related chargebacks are included in both fraud and chargeback rates,so merchants with high fraud rates would also have high chargeback rates,leading to potentially excessive penalties.

Merchants should note that the new indicator only monitors card-not-present transactions,excluding card-present scenarios,a significant change.This reflects the card network's sensitivity to business trends and emphasizes the importance of addressing online merchant risks. Observations show that offline transaction fraud rates have significantly decreased with the adoption of chip cards, while online transaction fraud rates remain high and fraud amounts continue to rise. Public data from Europe shows that cross-border online transaction fraud amounts reached $500 million annually.

For merchants, the financial loss after encountering chargebacks and fraud is the most significant cost. Businesses lose revenue from sales, inventory, and must pay chargeback refund fees. Consequently, most companies will increase operational costs to reduce chargebacks and disputes. All these impacts ultimately harm the business's reputation.

Regardless of how international card network rules change,chargeback rates and fraud rates have always been and will continue to be critical for businesses.Identifying the warning signs of chargeback fraud and implementing preventive measures is essential.

ONERWAY holds licenses such as EMI in the UK,MSB in the US,and MSO in Hong Kong.It has passed PCI-DSS Level Certification and is of principal members of Visa and Mastercard.
As a leading cross-border payment company,ONERWAY has a professional risk control team and industry-leading intelligent risk management tools to help businesses monitor every transaction in real-time.Customized monitoring solutions for fraud and chargeback indicators can also be provided.

ONERWAY's chargeback experts have developed industry-leading pre-dispute products. Transactions using ONERWAY's pre-dispute products will be prevented from disputes and excluded from the new VAMP monitoring indicators,avoiding being blacklisted by the card network.This also applies to existing VDMP indicators.Moreover,any fraud reports resolved through ONERWAY's pre-dispute products will be excluded from the fraud transaction count in the VAMP new indicators.

We will continue to provide businesses with professional cross-border payment service solutions and related payment expertise,ensuring the security of your operations.For more information or if you encounter any issues during your operations,please feel free to contact us for consultation.We are dedicated to resolving your concerns!