1. "Fraud Alerts": The Digital Merchant's New Nemesis
Your source for payments education
"Fraud Alerts":  The Digital Merchant's New Nemesis
Scott Adams, FraudPVP.com, CEO/Founder
Lyz Nesvold, Clickbank.com, Director of Risk Service Management …

2. Key Takeaways Learn what “Fraud” is
Understand Visa regulations around Fraud
Learn about some methods to fight back

3. What is a Fraud Rate?
Currently, Visa determines your fraud rate by the dollar amount of your fraud transactions each month in comparison to your sales in USD and USD settled currency for that same month.
Transactions that qualify as Fraud are reason codes entered by the issuer of the customer’s bank during the dispute.
We have found in fraud data over 85% of this is friendly fraud, not stolen cards or criminal fraud.
This is not the same as your chargeback rate. Fraud rate is dependent on only fraud reason codes, where as Chargeback rate is all chargebacks. You can have a fraud alert that never becomes a chargeback.

4. October 2019
Visa is changing the way their programs are structured to make it even more restrictive. This includes Chargeback rates, fraud rates and the monitoring of acquirers as well.
We will go over the new regulations, as taken directly from Visa’s Site:
bda1cad4d/lonew

5. Qualification Criteria
Visa Early Warnings
Early Warning Notifications
Early warning notifications provide acquirers and merchants and opportunity to reduce fraud and/or dispute levels before a merchant and its acquirer are identified in the VFMP, VCMP and or VAMP. Effective 1 October 2019, Visa will provide acquirers with monthly Early Warning notifications when their merchants do not exceed the program standard thresholds but have met the following qualifications in the previous month:
Early Warning Type
Qualification Criteria
VCMP Early Warning
75 or more disputes AND
0.65 percent or higher ratio of dispute count-to-sales count
VFMP Early Warning
USD 50,000 or more in fraud amount AND
0.65 percent or higher ratio of fraud dollar-to-sales dollar amount
VAMP Early Warning
USD 250,000 or more in fraud amount and/or 375 or more in dispute count AND
0.45 percent or higher ratio of dispute count-to-sales count / fraud dollar-to-sales dollar amount

6. Enhancements to Risk Programs
Enhancements to Risk Program Thresholds
The following table outlines the changes to the VCMP, VFMP and VAMP thresholds. Each month, a merchant and its acquirer will be identified if it meets or exceeds these thresholds:
Program
Threshold Criteria
VCMP Standard Program
100 or more in dispute count AND
0.9 percent or higher ratio of dispute count-to-sales count
VCMP Excessive Program
1,000 or more in dispute count AND
1.8 percent or higher ratio of dispute count-to-sales count
VFMP Standard Program
USD 75,000 or more in fraud amount AND
0.9 percent or higher ratio of fraud dollar-to-sales dollar amount

7. How do I get my fraud rate?
Your acquirer/processor can provide you with the transactions that have been reported as fraud from the issuer.
If you have an early warning notice of being in the VFMP program, then you should be provided with a TC-40 report, which is your fraud report.
If you can’t get it through your acquirer/processor, there are companies here that can help you with that.

8. Looking at the Fraud Data
Looking at each transaction, you can put some of these methods to use:
Refund Reasons –
What is your policy, is it causing issues?
Are your customers refunding for common reasons?
Do you utilize Refund Reason codes?
Did the Customer call in?
Did the Customer receive the product?
Is your sales flow confusing or the billing terms not clearly stated?

9. Looking at these transactions, are they Friendly Fraud?
Fraud Data Continued
Looking at these transactions, are they Friendly Fraud?
If the customer is verified through the data they provided, that is a very easy way to tell.
Criminal Fraud…
Are they stealing product by having it shipped to empty lots, odd addresses?
Are they using stolen cards?
Does the information not match the card holder or the person making the order? (billing address, shipping address, phone number and device location are all different)

10. What Kinds of Programs Can Help?
Third Party Data – These providers help with that customer verification piece.
Representment Companies – These guys fight the chargeback so you can retain the loss for friendly fraud.
Pre-CB Alert Services are products that are driven to prevent the fraud alerts and chargebacks.
VMPI – Visa Merchant Purchase Inquiry – Visa service that communicates between issuers and merchants to prevent friendly fraud

11. Visa Merchant Purchase Inquiry
No myths – Just Facts

12. Visa Merchant Purchase Inquiry
I heard it’s not live.
Its been live nearly a year
Someone told me only 3 issuers used it.
Issuers all over the world are participating
VMPI Myths or Facts?
Only large merchants allowed.
Any size merchant is welcome
Its really difficult to integrate and takes a long time.
Little to no integration … Live within days

13. Visa Merchant Purchase Inquiry
Provides Cardholders Information from Merchants
Combats “Friendly Fraud”
VMPI: a few more facts
Prevents previously refunded chargebacks
Let’s merchants receive TC40
and other data in real time
Saves sales for merchants

14. How does it Work? – The OLD Way
The customer calls their issuing bank
Customer says “I don’t recognize…”
Issuing bank files a chargeback
Merchant loses the sale and is assessed fees

15. How does it Work? – The VMPI Way
The customer calls their issuing bank.
The agent for the bank pushes the Inquiry to VMPI.
VMPI provides the transaction details to the bank.
The agent relays the information to the customer, closing the transaction.
Merchant keeps their money and there is no chargeback!

16. VMPI Info and Merchant Case Study
NOTE: All exact numbers in this case study are changed to protect confidentiality, but the ratios are real

17. VMPI – North America Coverage
USA/Canada – Top 5 Banks:
Wells Fargo
Bank of America
Chase Bank
Citibank
Capital One
... Hundreds more

18. VMPI – International Coverage
Non-USA – Top Banks:
BBVA Bancomer
SBI Cards
ANZ
HSBC Mexico
Banco Santander
CitiBank
Banco do Brasil

19. VMPI Terminology Deflections Refunds Pre-emptive Rapid Resolution
Alerts and Notifications

20. Clickbank’s Results 48% Saved Inquiries and deflections
These are transactions consumers called their bank on
Deflections: merchant keeps the money and lives to bill another day
February 2019 – Results*
Inquiries from Visa card holders:
11685
Deflected – Cardholder remembered:
5635
Saved Sales:
No Chargeback
Saved the Sale
48% Saved
* Exact numbers changed to protect confidentiality – Percentages are real

21. Clickbank’s Results 78% Avoided Pre-emptive refunds
These are inquiries on transactions refunded before the consumer called
All would have been chargebacks
February 2019 – Results*
Without VMPI:
1635
Issuer honored our Refund Alert:
1270
Lower Chargebacks:
No Chargeback
No Chargeback Fees
Didn’t hit their CB Rate
78% Avoided
* Exact numbers changed to protect confidentiality – Percentages are real

22. Clickbank’s Results February 2019 – Results* Show me the money!
Assumptions
Avg Ticket of $35
Chargeback fee of $25
Inquiries from Visa: $408,975
Chargeback Fees of: $292,025
VMPI Deflected 48%:
Inquiries $408,975 x 0.48: $196,308
Fees of $292,025 x 0.48: $140,172
Total Saved: $336,480 Or
48% of Inquiries Won
* Exact numbers changed to protect confidentiality – Percentages are real

23. Clickbank’s Results Real Time Data Uses Stop shipment
February 2019 – Results*
Fraud / TC40: 6135
Chargebacks: 9420
Cancel Recurring: 770
Exception:
If even 10% of these placed a second order after the first report
Another $59,115 saved
Real Time Data
Uses
Stop shipment
Revoke entitlement
Prevent future transactions
Receive these alerts at the exact same time as the Issuer reports it
No more waiting 24 hours to 3 weeks or never getting them at all
* Exact numbers changed to protect confidentiality – Percentages are real

24. How do I sign up? Figure out data strategy
… think about what you need?
Find a Merchant Facilitator
Go live in days
Impact your CB rates and save money fast!

25. Director of Risk Service Management Lyz@Clickbank.com
Questions?
Scott Adams
CEO/Founder
Lyz Nesvold
Director of Risk Service Management