Nearly 1 in 3 Merchants Do Not Know If Visa's Tighter VAMP Threshold Affects Them

Visa reduced the VAMP excessive merchant threshold from 2.20% to 1.50% - a 32% cut. Yet nearly 1 in 3 of 250 merchants surveyed do not know whether that change is affecting their business, and only 26.8% said they actively monitor the TC40 fraud records that feed the ratio. You cannot manage a threshold if you do not know how close you are to it. That is a visibility problem.

One of the biggest VAMP-related changes this year was a 32% reduction in Visa's excessive merchant threshold. Yet nearly 1 in 3 merchants don't know whether the changes are affecting their business.

More than half of the 250 merchants said they had little to no knowledge of card network rules overall, while only 26.8% said they actively monitored the TC40 fraud records that feed into their VAMP chargeback ratio.

This might sound like an awareness problem, but I think it's a visibility problem. You can't manage a threshold if you don't know how close you are to it.

Earlier this year, Visa reduced the VAMP excessive merchant threshold from 2.20% to 1.50%. That already reduced the margin for error, but a smaller margin for error becomes much more dangerous when merchants don't know how much margin they have left.

A merchant might feel perfectly comfortable today. Until fraud increases, a fulfilment issue creates more disputes, or a peak trading period introduces a very different transaction profile. Suddenly the ratio moves and the merchant only becomes aware of the problem once somebody else flags it.

Historically, some merchants have relied on their acquirer, processor or fraud provider to surface these issues. There may well be monitoring happening elsewhere in the payment chain. But I don't think that replaces having visibility yourself.

What merchants need to see

To me, the biggest takeaway from this research is that merchants need to understand:

• Where their VAMP ratio currently sits
• How that ratio is trending over time
• Where fraud and disputes are originating
• Which products, markets or customer segments are driving changes
• How much room exists before the threshold becomes a problem
• What they'll do if performance starts deteriorating

The VAMP threshold getting tighter was one problem. Not knowing how close you are to it may be an even bigger one.

Related: Visa's VAMP threshold reduction, what to do if Stripe warns your dispute rate is too high, how it works, and the FAQ.

If you want a clearer picture of where disputes and fraud are originating on your data, book a demo.

Originally shared on LinkedIn.